The Bion Company has a Research and Development (R&D) building that is shared by three wire and cable groups: High Voltage, Medium Voltage, and Low Voltage. Adjacent to the R&D building is a pilot plant, a small-scale production facility designed for limited runs of experimental and commercial products. The three groups rely on the pilot plant to produce samples of their formulations. In the pilot plant, sample sizes vary from about 1,000 kilograms to 10,000 kilograms. The R&D groups, including the pilot plant, are run as cost centers. The pilot plant also takes on special production runs for external customers that are too small for a regular plant. The pilot plant consists of three combination blending/extruding machines, which produce pellets of compounded material. Unlike large commercial compounding machines, which can operate 24 hours/day, these machines are run for approximately 1,000 hours a year. In the past, the pilot plant has costed its jobs based on direct materials, variable machine time, and allocated overhead. Overhead is allocated by machine time. A single plant-wide machine rate is calculated pooling all three machines. The overhead pool includes plant fixed costs plus the labor cost of the department. Approximately 20 percent of the machine technicians' time is spent performing general clean-up and maintenance. Before each job, machine time is calculated by a computer program, which outputs feed rate and set-up parameters. Each product is scheduled to a specific machine based on its formulation. The cost schedule of each machine is shown below. Capacity represents the historic annual average capacity:

Clean-up (hours/batch) Capacity (kilograms/year) Variable Cost (S/hour) Operators Machine 1 250,000 25 2 Machine 2 6 250,000 25 2 Machine 3 500,000 50 Fixed costs: $200,000/year Labor costs: 1 manager @ $45,000/year 6 technicians @ $30,000/yearjob \"3&2: Composition and Direct Cost Sample run 5,{I kilograms: sea NCPE-Do. RESIN manilcg. 8% KISUh'lA. FLMI'lE RETARDANT $9.12J'ltg. 2% COMPOUND Z, ANTI OXIDANT $0.14!]:g. Run on machine I 25!] kilograms per hour for 20 hours Total weigh-up time' 1+5 employee hours * Total weigh'up time is amount of labor time required to locate, prepare, and mix the direct materials prior to inserting them in the machine. a. Calculate the cost of the sample run as charged to the Low Voltage department. b. What is wrong with this system? Construct an alternative costing system and describe its benets. e. fiecalculate the cost of this run using this new system