QUESTION 4 XYZ Corporation previously used conventional cost allocation and allocated its overhead costs based on Direct Labour (DL) Hours. Recently XYZ Corporation adopted activity-based costing (ABC) to determine product costs. The company has provided the following monthly data conceming its activity-based costing system: Activity Cost Pool Processing Packaging Assembly Total Budgeted Cost $67,500 $273,700 $204,000 Total Budgeted Base 5,000 Machine Hours 700 Setups 80,000 DL Hours Processing Packaging Assembly Total Actual Activity Model X Model Z 4,000 1,000 300 400 10.000 70.000 The team that implemented ABC felt that the above data were typical of ongoing operations. However, some employees recalled that when demand was really heavy in the past, machines had worked 15,000 hours in a month and the factory handled 800 setups without production delays or use of overtime. REQUIRED: Question 4-A: Using conventional cost allocation, calculate the allocated overhead costs to Model X and Model Z 13 marks Question 4-B: Using ABC, calculate the allocated overhead costs to Model X and Model Z. What might be the role of capacity? 17 marks Question 4-C: Discuss possible reasons that ABC systems designed for internal decision-making may not conform to generally accepted accounting principles (such as IFRS)? 15 marks Question 4-D: Discuss the advantages and disadvantages of regular ABC compared to time-based ABC. 15 marks! Question 4-E: How may ABC help inform the decision to initiate production of a new product? Discuss the role of idle capacity. 15 marks Total 25 marks