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Q11.

Oliver Systems produces two different products (Product 1 and Product 2) , is considering whether to use ABC versus Traditional costing. For ABC costing Parker would use three different activities to allocate manufacturing overhead: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver.

If Oliver used traditional costing, they would use machine hours to allocate the cost. The cost of each activity and usage of the activity drivers are as follows:

Activity/ (Driver)	Total estimated cost	Usage by Product 1	Usage by Product 2
Design (engineering hours)	$118000	130	210
Machining (machine hours)	$238000	1530	1350
Inspection (Batches)	$78000	70	60

Using traditional costing, what is the total manufacturing overhead that will be allocated to Product 1?