Question 1 Auto Driver Ltd. (ADL) manufactures and sells automotive parts. ADL allocates manufacturing overhead to both of its customers based on machine hours. One of ADL's customers, Prairie Motors, has regularly complained of being charged non- competitive prices, so ADL is considering using an activity-based costing (ABC) system and has collected the following information: Activity Cost driver Machine setup Number of setups Material handling Number of parts Milling Machine hours Assembly Direct labour hours Costs $ 37,200 27,300 24,000 136,500 Use of cost drivers Prairie BC Motors Motors Total 210 100 310 100 30 130 1,200 2,800 4,000 1,500 2,400 3,900 Required: a) Calculate the overhead costs that should be allocated to Prairie Motors under ADL's current costing system. b) Calculate the overhead costs that should be allocated to Prairie Motors under the ABC system. c) Assume that ADL sets prices based on a cost-plus-25% methodology, and all other costs remain constant. Calculate the amount by which the price charged to Prairie Motors should increase or decrease if ADL changes to an ABC system