Rachel's Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:
| Number of | Number of | Number of |
| Product | Setups | Components | Direct Labor Hours |
| Overhead costs | $40,000 | $120,000 |
Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.
| a. | What is the total amount of overhead costs assigned to the standard model? |
| b. | What is the total amount of overhead costs assigned to the deluxe model? |
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
| c. | What is the total amount of overhead costs assigned to the standard model? |
| d. | What is the total amount of overhead costs assigned to the deluxe model? |
| e. | Explain the difference between the costs obtained from the traditional costing system and the |
ABC system. Which system provides a better estimate of costs? Why?
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