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Problem statement :- Decorative Doors, Inc., produces two types of doors Interior and Exterior. The companys simple costing system has two direct-cost categories (materials and labor) and one indirect-cost pool. The traditional costing system allocates indirect costs on the basis of machine hours. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to the production of two doors of Decorative Doors, Inc. for the most recent year is as follows:

	Interior	Exterior
Unit sold	3200	1800
Selling price	$ 125	200
Direct material cost per unit	$ 30	45
Direct manufacturing labor cost per hour	$ 16	16
Direct manufacturing labor hour per unit	1.5	2.25
Production runs	40	85
Material moves	72	168
Machine setups	45	155
Machine - hours	5500	4500
Number of inspections	250	150

The management has recently heard of other companies in the industry who are now using an activity-based costing (ABC) system and are therefore curious to understand how an ABC system would affect their product costing decisions. After analyzing the indirect-cost pool for Decorative Doors Inc., the management identified the following six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Decorative Doors Inc., collected the following data related to these indirect-cost activities:

Activity	Activity Cost	Activity Cost Driver
Production Scheduling	$ 95,000	Production runs
Material Handling	$ 45,000	Material moves
Machine setup	$ 25,000	Machine setups
Assembly	$ 60,000	Machine - hours
Inspection	$ 8,000	Number of inspections

Marketing costs were determined to be 3% of the sales revenue for each type of door

Note- Provide answer in detailed explanation on how the calculation is done along with explanation

Question 1.1 Calculate the cost of an interior door and exterior door under the existing simple costing system.

Question1.2 Calculate the cost of an interior door and exterior door under an activity-based costing system.

Question1.3 Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior door and an exterior door?

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