Part 2- ABC costs allocation 8 points The managing Director of ITEKA thinks that today's indirect cost allocation is not satisfying. He thinks that a method based on ABC would be more relevant. He has asked to the accountant to prepare a table with the activities' costs and the corresponding cost drivers. Nb of cost Indirect Costs Costs (in) Activities Activities Costs (in ) Total nb, of cost drivers drivers for cost drivers product P Purchasing Department Manufacturing Department Sales & After Sales Administration Department Maintenance 89 600,00 Deliveries & invoicing Promotion campaigns 40 000,00 Sales & customer accounting 122 500,00 Placing orders Receivings 312 900,00 Manufacturing 62 500,00 Nb. of batches 277 140 60 000,00 No. of components references 200 401 280 000,00 Nb. of direct labour hours 10000 2500 32 900,00 Nb.of batches. 277 140) 84 500,00 Nb.of customers'orders 500 200 5 100,00 Nb. of models 5 13.000,00 Nb.of customers'orders 500 200 Research & Development Total indirect costs 25 000,00 590 000,00 Inventory & suppliers accounting R&D projects 27 000,00 Nb. of components references 200 40 25 000,00 Nb. of models 5 1 590 000,00 QUESTIONS Using the template shown in exhibit and given in the excel table (ABC) 2-1. How much is the product P costing with ABC costing? How much is the new margin? Answer: 2-2. Did the manufacturing cost of P change in comparison with the fist method of indirect costs allocation? Why? Answer: 2-3. Please comment the reasons why the margin of P has changed with the ABC method. Answer: 2-4. As the new controller of the company, you are in charge of reviewing the ABC model. For each activity, do you agree with the proposed cost driver (Y/N)? You can use the table below and put a cross into the right column. If no, what is the new cost driver you would propose? Please argue. You can write your answer after the table proposed. Activities cost drivers Is the cost driver relevant? Yes No If no, your proposition of better cost driver Placing orders No. of batches Receivings Manufacturing Maintenance Deliveries & invoicing Nb. of components references Nb. of direct labour hours Nb.of batches Nb.of customers'orders Promotion campaigns Nb. of models Sales & custome sr accounting No.of customers'orders Inventory & suppliers accounting No. of components references R&D projects Answer: No. of models