Activity-Based Costing, Traditional Costing22. The controller for Mitchell Supply Company has established the following overhead costpools and cost drivers:BudgetedOverhead Cost PoolOverhead CostCost DriverMachine setups$150,000Number of setupsMaterial handling52,500Units of raw materialQuality control inspection37,500Number of inspectionsOther overhead costs90,000Machine hoursTotal$330.000Budgeted LevelOverhead Cost Poolfor Cost DriverOverhead RateMachine setups100 setups$1,500 per setupMaterial handling50,000 units$1.05 per unitQuality control1,000 inspections$37.50 per inspectionOther overhead15,000 machine hours$6 per machine hourOrder no. 610 has the following production requirements:Machine setups5 setupsRaw material10,000 unitsInspections12 inspectionsMachine hours600 machine hoursRequired:A. Compute the total overhead that should be assigned to order no. 610 by usingactivity-based costing.B. Suppose that Mitchell were to use a single, predetermined overhead rate based onmachine hours. Compute the rate per hour and the total overhead assigned to order no.610.C. Discuss the merits of an activity-based costing system in comparison with a traditionalcosting system.
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