1. Returning from a seminar on ABC system, the CEO of Momi Company has requested the management accountant to consider switching to ABC. Information is collected for the three approaches to allocating manufacturing overhead, and you are to assist in deciding which of the three approaches the company should use to apply overhead to products.

Information for each approach is provided as follows:

• One plant-wide rate. The predetermined overhead rate is 150 percent of the direct labour cost.
• Direct labour costs for the year totalled $100,000.
• Department rates. The Machining department uses a rate of $50 per machine hour, and the Assembly department uses a rate of $45 per direct labour hour.
• During the year, the Machining department used 1,200 machine hours, and the Assembly department used 1,100 direct labour hours.
• Activity-based costing rates. Three activities were identified, and rates were calculated for each activity.

Purchase requisitions	$18 per requisition processed
Production setup	$40 per setup
Quality control	$85 per inspection

During the year, 850 purchase requisitions were processed, 1,300 production setups were performed, and 400 products were inspected