Smart Wear ("SW") manufactures school uniforms. It uses normal costing and a plant wide MOH rate based on direct labour hours. SW has two operating departments: A and B. The manufacturing activities are divided into cutting, sewing, maintenance (including utilities) and material handling (which is automated and occur only in Department A). Materials for uniforms are cut by machines in Department A only. Next, in Department B, the labour-intensive jobs of sewing and packing are performed by workers using individual sewing machines. Recently, the Finance Director is considering using activity-based costing (ABC) to allocate MOH. The accountant has provided the following annual budgeted activities data: Page 4 of 5 Overhead Cost Pool Budgeted Cost Driver Budgeted Cost ($) Activity Cutting 222.720 Machine hours 55.680 Sewing 243,000 DLH 54,000 Maintenance 167,040 Machine hours 55.680 Material handling 61,250 Set up 245 ( each set up can produce 500 units) The following data relates to the current job completed for Bright School, a regular customer. Department Department A B Direct materials $10,000 Direct labour rate $10.00 per DLH Number of units completed 5,000 Direct labour hours per unit 0.2 0.6 Machine hours per unit 0.6 0.3 Number of set ups 10 The company's budgeted direct labour hours for the year is 138,802 direct labour hour (DLH). SW prices its products based normal full product cost plus 10% gross profit margin Required: (a) Using normal costing method, compute the price (round to nearest dollar) that SW should bill Bright School for the current job using plant-wide rate. (b) Using normal costing method, compute the price that SW should bill Bright School for the current job using ABC rates (rounded to nearest dollar). (c) Discuss the suitability of using activity-based costing to allocate overheads for SW (you should compare the suitability of other allocation methods in your answer). Explain the difference in profit observed (if any)