Assume that Rio conducts an ABC analysis for a second produc…
Assume that Rio conducts an ABC analysis for a second product of Agatha, the ‘Darkhold’ annual planner, which is very popular amongst young professionals that have moved on from their first career job. Rio’s analysis indicates the following based on actual results: Traditional system MOH allocation information: 30,000 DLH $420,000 MOH allocated to the ‘Darkhold’ annual planer. ABC MOH allocation information. Activity Calculation ABC Cost Production $10.33 per machine hour × 30,000 machine hours $309,900.00 Supervisor Wages $21.20 per hour × 4,000 hours 84,800.00 Quality Inspection $10.39 per inspection hour × 10,000 inspection hours 103,900.00 Total $498,600.00 Given the above information and the other information associated with Exhibit 1, Explain what would be the benefits to Agatha from adopting an Activity Based Cost system. Is there evidence of production cross-subsidization? How may Agatha’s management use the ABC information to improve decision making? YOU MAY ADDRESS THE QUESTIONS IN A PARAGRAPH OR IN BULLET POINTS BUT MAKE SURE YOU ARTICULATE COMPLETE THOUGHTS.