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Yarn Company produces two different Yarn products, Cotton Yarn (Product A) and Wool Yar (Product B). Yarn Company uses a traditional volume-based costing system in

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Yarn Company produces two different Yarn products, Cotton Yarn (Product A) and Wool Yar (Product B). Yarn Company uses a traditional volume-based costing system in which direct labor hours are the allocation base Yarn Company is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,900,000 across three activities: Engineering, Manufacturing, and Inspection Under the traditional volume-based costing system, the predetermined overhead rate is $275/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Usage by Usage by Activity Cotton Yarn Hool Yarn Rate (Product A) (Products) $ 120/hour 2,300 9,500 $1.00 550.000 550.000 $ 160 3,850 2.200 Engineering Engineering Hours) Manufacturing (Direct Labor Hours) Inspection (Batches) 19 Required: a. Calculate the indirect manufacturing costs assigned to Cotton Yarn under the traditional costing system Indirect Manufacturing Costs b. Calculate the indirect manufacturing costs assigned to Wool Yarn under the traditional costing system indirect Manufacturing Costs c. Calculate the Indirect manufacturing costs assigned to Cotton Yarn under the ABC system Indirect Manufacturing Costs d. Calculate the indirect manufacturing costs assigned to Wool Yarn under the ABC system. Indirect Manufacturing Costs e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B

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