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1. Activity Base Costing (ABC) 25 points Yanguba has two produce lines for it well marketed Ice cold Fruit drink: 20 Ounces and 40 ounces. The company assigns $700,000.00 in manufacturing overhead costs to two departments: Mixing, Bottling and Packing Additional information about each product line is shown below; 20 ounces 40 ounces Number of units Produced per month 220,000 80,000 Number of Units Sold per month 150,000 60,000 Direct Material cost per unit 5 8 Direct Labor Cost per hour 15 15 Direct Labor hours per unit 0.5 0.7 The following cost pool and cost driver was used Amount Total Drive Cost Pool Allocated Cost Driver Volume Mixing Department 300,000 Machine hours 1750 MH Boutling Department 240,000 Bottle requisitions 144,000 Packing Department 160,000 Direct Labor hours 5,450 DLH Total Allocation 700,000 The amount of driver activity corresponding to each product line is as follow Cost Driver 20 ounces 40 ounces Machine Hours 1,050MH 700 MH Bottle Requisitions 93,600 50,400 Direct Labor hours 3,161 2,289 (a) Allocate manufacturing overhead costs to each product line using Bottle requisitions as a single cost driver. (b) Allocate manufacturing overhead costs to each product line using the ABC approach (C) Compute the total manufacturing costs assigned to each product line when using ABC and traditional method. (d) As a manager advice the CEO of the company what is the most cost effective method that should be used. Give some key example. (Hint: keep your answer short, sweet and simple)

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