Tony Corporation currently uses a traditional costing system, applying $300,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual activity pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the activity pools and respective driver volumes can be given as.

Product

Activity 1

(Driver: DLH)

Activity 2

(Driver: SU)

Activity 3

(Driver: PC)

X

400

25

1,300

Y

600

75

700

Activity Cost

$60,000

$140,000

$100,000

It is

Select one:

a.

second-stage and direct labor hours (DLH), production setups (SU), and number of parts components are activity drivers

b. first-stage and direct labor hours (DLH), production setups (SU), and number of parts components are resource drivers

c. second-stage and direct labor hours (DLH), production setups (SU), and number of parts components are resource drivers

d. first-stage and direct labor hours (DLH), production setups (SU), and number of parts components are activity drivers