senkowski ltd cost information activity purchasing allocation base purchase ord 385521

Senkowski Ltd. cost information: Activity Purchasing, Allocation Base Purchase orders, Volume of Activity 30,000, Overhead costs $150,000. Activity Receiving, Allocation base Shipments received, Volume of Activity 15,000, Overhead Cost 60,000. Activity Machine setups, Allocation Base Setups, Volume of Activity 2,500, Overhead costs 200,000. Activity Quality control, Allocation base Inspections, Volume of Activity 18,000, Overhead costs 90,000. Direct materials are $15 per unit for luxury handbags and $11 per unit for deluxe handbags. There were 12, 500 direct labor hours, each of which was charged to inventory at $18 per hour. A. Management is trying to decide between using the traditional allocation method based on direct labor hours and using activity based costing. Calculate the overhead rates for each method. B. One particular batch of 40 luxury handbags had the following specifications: direct labor hours 8, purchase orders 4, shipments received 3, setups 2, inspections 12. Calculate the overhead to be allocated to the bags under the traditional and activity based costing techniques. C.Which costing method do you think is better for the company? Why?