Winterland, Inc $\text { Indirect costs consist of the following: }$

Essay

Winterland, Inc., produces two types of skis, downhill skis and cross country skis. Product and production information about the two items is shown below:
$\begin{array}{|l|l|l|}\hline&\text { Downhill skis } & \text { Cross country skis }\\\hline\text { Number of sets sold........... } & 75,000 & 125,000 \\\hline \text { Number of setups............. } & 200 & 50 \\\hline \text { Total direct labor hours...... } & 150,000 \text { hours } & 250,000 \text { hours } \\\hline \text { Direct labor hours per unit.. } & 2 \text { hours } & 2 \text { hours } \\\hline \text { Total machine hours............... } & 25,000 \text { hours } & 100,000 \text { hours } \\\hline \text { Machine hours per unit...... } & 0.333 \text { hours } & 0.08 \text { hours }\\\hline\end{array}$

$\text { Indirect costs consist of the following: }$
$\begin{array}{|l|c|}\hline \text { Depreciation of factory equipment. } & \$ 2,000,000 \\\hline \text { Setup costs. } & 1,500,000 \\\hline \text { Miscellaneous indirect costs..... } & 1,000,000 \\\hline \text { Total... } & \$ 4,500,000 \\\hline\end{array}$
Required:
1. If Winterland uses the traditional method of allocating overhead costs based on direct labor hours, what is the amount of indirect costs per set of skis for each of the two types of skis?
2. If Winterland uses activity based costing, what is the total amount of indirect costs per set of skis for each of the two types of skis? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs based on the number of direct labor hours.