ACCT 202 CASE \#2-ACTIVITY BASED COSTING 25 Points Due: March 18TH at 11:59pm Dooley Corporation makes two types of ladders; short and tall. Currently, Dooley allocates overhead to the products using a plantwide overhead rate using direct labor-hours as the activity base. A pricing consultant recently had recommended that Dooley use an Activity Based Cost system for allocating overhead and identified the below activities, cost drivers, estimated costs, and estimated cost driver units for the upcoming year: In addition, management estimated 2,000 direct labor-hours for year 5 . Assume that the following cost driver volumes occurred in February, year 5 : Required: a. Compute the predetermined overhead rate using direct labor- hours as the activity base. b. Compute the activity rates for each of the activities suggested by the consultant c. Compute the cost per unit (for both short and tall ladders) using the plantwide overhead rate. d. Compute the cost per unit (for both short and tall ladders) using Activity Based Costing e. Management has seen the above results and wants an explanation for the discrepancy between product costs using the plantwide rate and Activity Based Costing. Write a 2 paragraph response to management, which includes your recommendation as to whether we should take the consultant's advice or not. Include the advantages and disadvantages of implementing Activity Based Costing..

1. ACCT 202 CASE #2-ACTIVITY BASED COSTING 25 Points Due: March 18TH at 11:59pm
Dooley Corporation makes two types of ladders; short and tall. Currently, Dooley allocates
overhead to the products using a plantwide overhead rate using direct labor-hours as the activity
base. A pricing consultant recently had recommended that Dooley use an Activity Based Cost
system for allocating overhead and identified the below activities, cost drivers, estimated costs,
and estimated cost driver units for the upcoming year: In addition, management estimated 2,000
direct labor-hours for year 5 . Assume that the following cost driver volumes occurred in
February, year 5 : Required: a. Compute the predetermined overhead rate using direct labor-
hours as the activity base. b. Compute the activity rates for each of the activities suggested by the
consultant c. Compute the cost per unit (for both short and tall ladders) using the plantwide
overhead rate. d. Compute the cost per unit (for both short and tall ladders) using Activity Based
Costing e. Management has seen the above results and wants an explanation for the discrepancy
between product costs using the plantwide rate and Activity Based Costing. Write a 2 paragraph
response to management, which includes your recommendation as to whether we should take the
consultant's advice or not. Include the advantages and disadvantages of implementing Activity
Based Costing.