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Orient Corporation manufactures auto parts for various automakers. In the past, Orient has been using a traditional overhead allocation system based solely on machine hours.

Orient Corporation manufactures auto parts for various automakers. In the past, Orient has been using a traditional overhead allocation system based solely on machine hours. Sensing that this system was distorting costs and selling prices, Orient has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows:

Activity Cost Pool

Total Cost

Total Activity

Labor Related

$72,000

10,000 Direct labor hours

Machine Related

$180,000

16,000 Machine Hours

Quality Control

$18,000

900 Inspections

Orient has received an order and will complete as Job #400 and expect to incur $1,200 of direct material, 40 hours of direct labor at $32 per hour, 80 machine hours, and 10 inspections. Orient needs a markup of 30% on the job. A). Calculate the activity rates and compute the expected cost of job#400 under the activity-based costing system? What should be the quote on this job? B). Relative to the activity-based costing system, would Job #400 have been overcoated or undercoated under the traditional system and by how much?

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