The Sabroso Chocalate Company uses activity based costing (ABC). The controller identified two activities and their budgeted cost:

Setting up equipment $270,000

Other over head $900,000

Setting up equipment is based on setup hours and other overhead is based on oven hours. Oscuro produces two products, Fudge and Cookies. Information on each product is as follows:

Fudge Cookies

Units produced 5,000 25,0000

Setup hours 4,000 1,000

Over hours 1,000 5,000

1. Calculate the activity rate for (a) setting up equipment and (b) other overhead

2. How much total overhead is assigned to Fudge using ABC

3. What is the unit overhead assigned to Fudge using ABC

4. Now, ignoring the ABC result, calculate the plantwide overhead rate, based on over hours

5. How much total overhead is assigned to Fudge using the plantwide overhead rate.

6. Conceptual Connection: Explain why the total overhead assgined to Fudge is different under the ABC system (using the activity rates) than under the nonABC system (using plantwide rate)