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Question 2 (11 marks) a) Discuss the circumstances that would require a business to change...

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Accounting

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Question 2 (11 marks) a) Discuss the circumstances that would require a business to change from traditional costing to ABC costing? (2 marks) b) Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: Activity Center Machine setups Assembly parts Packaging pieces Machine hour per unit Production volume Estimated Activity Product 1 Product 2 15 45 3,000 3,000 500 400 4 3 750 1,500 Estimated Cost $ 10,800 144,600 55,350 Required: i) How much overhead would be allocated to each unit under the traditional allocation method? (2 marks) ii) How much overhead would be allocated to each unit under activity-based costing? (5 marks) iii) Would you recommend a change to ABC costing for this company? Justify your answer (2 marks)

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