Q$.1$ Fanta Company has budgeted overhead costs of $$1,040,000.$ It has allocated overhead

on a plantwide basis to its two products $($wool and cotton$)$ using direct labor hours which

are estimated to be $520,000$ for the current year. The company has decided to experiment

with activity$-$based costing and has created two activity cost pools and related activity cost

drivers. These two cost pools are: Cutting $($cost driver is machine hours$)$ and Design $($cost

driver is number of setups$).$ Overhead allocated to the Cutting cost pool is $$500,000$ and

$$540,000$ is allocated to the Design cost pool. Additional information related to these pools

is as follows.

$$ Required $>$

Determine the amount of overhead allocated to the wool product line and the cotton

product line using activity$-$based costing.

What is the difference between the allocation of overhead to the wool and cotton product

lines using activity$-$based costing versus the traditional approach, assuming direct labor

hours were incurred evenly between the wool and cotton?