The budgeted manufacturing overhead costs of Bill's Custom Welding, LLC for the year are:

Type of Cost	Cost Pools
Electric Power	$3,000,000
Inspection	$2,000,000
Budgeted overhead costs	$5,000,000

Under a traditional cost system, the company estimated the budgeted capacity to be 40,000 machine hours. Bill is considering changing to an activity-based cost system; so, he provided these estimates:

Type of Cost	Activity-based cost drivers
Electric power	60,000 kilowatt hours
Inspection	10,000 inspections

Producing 1000 units of custom welded flatbed trailers required the following:

Direct materials cost	$65,000
Direct labor costs	$85,000
Machine hours	12,000
Direct labor hours	5,000
Electric power - kilowatt hours	22,000
No. of inspections	1,000

REQUIRED:

a.	What are the manufacturing costs per trailer under the traditional cost system that applies manufacturing overhead costs based on machine hours?
b.	What are the manufacturing costs per trailer if the activity-based costing system is implemented?
c.	Explain the difference between activity-based costing and conventional costing methods, and how ABC might enhance the financial reporting of Bill's Custom Welding, LLC.