Novell Inc. is a manufacturer of knives. The company has always used a plant-wide rate for allocating manufacturing overhead to its products. The allocation method was based on direct manufacturing labour hours, and the rate was $400 per labour hour. The plant manager believes it is time to change to a better method of cost allocation. The accounting department has established new relationships between production activities and manufacturing overhead as follows: Activity Cost driver Allocation rate Materials handling Number of parts $4 per part Assembly Labour hours $40 per hour Inspection Time item is at inspection station $6 per minute What are the indirect manufacturing costs of a batch of 100 pairs of knives, assuming that ABC is used? The batch requires 200 parts, 12 direct manufacturing labour hours and five minutes of inspection time. Which of the following is not a correct analysis for a batch of knives from the information provided above: O Using ABC, this product is cross subsidizing other products sold within Novell. If the selling price for a batch of knives is $ 5,000, under the traditional costing, Novell will be making a profit of $ 200 per batch. O Under the traditional costing, the overhead cost applied is $ 4,800 O The initial price is based on the traditional cost. In comparison to ABC, this batch of knives is under-priced. If the selling price for a batch of knives is $ 5,000, under ABC, Novell will be making $ 3,690 per batch