Wolseley's dilemma of Traditional Costing versus Activity Based Costing Wolseley Manufacturing Corporation manufactures various electronics products and follows a traditional (job-order) costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, C18R and G19R, about which it has provided the following data: C18R G19R Direct materials per unit $10.20 $50.50 Direct labor per unit $8.40 $25.20 Direct labor hours per unit. 0.40 1.20 Annual production 30,000 10,000 The company's estimated total manufacturing overhead for the year is $1,464,480 and the company's estimated total direct labor-hours for the year is 24,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear Activities and Activity Measures Supporting direct labor (DLHS) Estimated Overhead Cost below: $552,000 Setting up machines (setups) 132,480 Parts administration (part types) Total 780,000 $1,464,480 Activities C18R G19R Total Supporting direct 12,000 12,000 24,000 labor Setting up 864 240 1,104 machines Part administration 600 960 1,560 Mike, who is the controller of the Company, is currently overseeing the project to switch from traditional costing to Activity-Based costing. He is in a meeting with the Cost Accountant of the company. The Controller goes over the data and makes the following comments: "Activity-Based Costing is a revelation in the modern-day world of manufacturing Industry. If we are correctly able to categorize the various nature of work into essential levels, then we can dramatically trace the precise nature of the overheard activity." Jacob, the Cost Accountant, quips, "how can we classify those levels of activities? Do we have some mechanism to identify them?" Mike responds, "Yes! We do."