Medina Corporation manufactures cruising bicycles and mountain bicycles. Estimated direct labor time to produce each type of bicycle is as follows:

Estimated bicycles produced :

Cruising Mountain

30,000 20,000

Direct labor hours per bicycle

Cruising Mountain

1 3

Estimated overhead for the two product lines = SAR 900,000

a. Compute the overhead cost assigned to each type of bicycle assuming direct labor hours is used to allocate overhead costs.

b. The controller is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the Mountain bicycle product line because of its complexity. He therefore developed the following three activity cost pools and related cost drivers to better understand these costs.