Laver Ltd is a manufacturer of tennis racquets. Rod, the sales manager received an order for 3,000 tennis racquets which

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Laver Ltd is a manufacturer of tennis racquets. Rod, the sales
manager received an order for 3,000 tennis racquets which were
immediately manufactured. The order required the following:
Machine set-ups
14 set-ups
Machine hours
6,500 machine hours
Materials weight
8,500 kgs
Number of units
3,000 units
Direct labour hours
5,500 hours
Laver Ltd has the following indirect cost data:
Activity Cost Pool
Cost driver
Cost ($)
Total level of cost driver
Machine Processing
Number of set-ups
48,000
40 set-ups
Electricity
Machine hours
140,000
22,500 hours
Materials Handling
Materials weight
34,000
35,000 kgs
Quality Control
Number of units
58,200
82,000 units
Packaging
Direct labour hours
73,800
14,560 hours
354,000
Required
Briefly comment on the importance of a costing system to Laver
Ltd.
Suppose that a single indirect cost rate based on machine hours
was used to allocate indirect costs. Calculate the indirect cost
rate.
What amount of indirect costs would be applied to the order of
3,000 tennis racquets using the indirect cost rate based on machine
hours?
Calculate the indirect cost rate for each cost pool identified
using Activity-Based Costing (ABC).
Assign the indirect costs to the order of 3,000 tennis racquets
using Activity-Based Costing (ABC).
Briefly comment on any differences in your answer between the
two methods.