Question 1: (35Marks)

Long Ave Inc. manufactures two products, Standard and Deluxe. Manufacturing overhead costs consist of:

Activity	Overhead Cost
Setting Up Machines	$245,000
Machine Fabrication	$540,000
Inspecting	$480,000
Shipping	$775,000
Purchasing	$340,000

Information on the two products is as follows:

Cost Driver	Standard	Deluxe
Direct Labour Hours	350,000	148,000
Machine Setups	285	420
Machine Hours	33900	44500
Inspections	350	290
Parts Shipped	6750	8550
Purchasing Orders	450	375

Currently, the controller uses a plant-wide overhead rate based on direct labour hours to assign overhead to the Standard and Deluxe products. The president has heard of activity-based costing and wants to see how the results would differ if this system were used.

Required:

1. Assign the total manufacturing overhead costs to the two products using the current plant-wide method.

2. Assign the total manufacturing overhead costs to the two products using activity-based costing (ABC).