Rather Bedding makes two types of pillowdown and foam. It is currently implementing an activity-based costing system.
In the past, all overhead had been applied on the basis of machine hours. The company produces 6,000 down pillows and
18,000 foam pillows per year. The following overhead cost data relates to its two types of pillows and the cost drivers:
	Cost Pool	Driver and Level	Estimated Costs	Use of Driver by Down Pillows	Use of Driver by Foam Pillows
	Equipment setup	360 setups	$2,16,000	120 setups	240 setups
	Materials ordering	6,000 orders	$60,000	2,400 orders	3,600 orders
	Quality control	2,000 inspections	$36,000	800 inspections	1,200 inspections
	Machining	8,000 machine hours	$86,800	4,200 machine hours	3,800 machine hours
Further Rather Bedding estimates the following costs to its two types of pillow:
	Particulars	Down Pillow	Foam Pillow
	Material Cost	$1,80,000	$4,50,000
	Labour Cost	$1,08,000	$2,70,000
a.Suppose that the ABC Bedding allocates overhead by a traditional approach wherein all overheads are applied based on machine hours.
What is the overhead cost per unit for both types of pillow when all overhead is applied based on machine hours? (4 Marks)
b.What is the overhead cost per unit for both types of pillow using ABC? (4 Marks)
c.Which two cost pools could be combined without affecting the unit overhead costs for both types of pillow using ABC? (2 Marks)
d.Calculate the total unit cost for both type of pillows using ABC? (3 Marks)
e. Discuss the difference in cost allocations between the traditional method and the activity-based costing approach? (2 Marks)