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1  Chicago Plant 
 GG toys should change its existing cost system from traditional costing to Activity Based 
 costing system. In Chicago plant, firm is allocating its overhead cost on the basis of 
 production run direct labor cost. In this plant overhead cost is very high, thus GG toys 
 should use a cost pool for its various activities. Different types of models of doll are 
 produced in this plant, thus firm may use machine hours, set up, production run, units 
 produced as the basis to allocate cost. 
 It will help the firm to lower its overhead rate and will add to the profitability of the firm. 
 Springfield plant  
 For Springfield plant, current costing system is appropriate as it produces only one model 
 i.e. cradles. Moreover workers are testing the components frequently during the 
 assembly process to ensure quality of the finished product. 
 Thus GG toys need not change its costing system for Springfield plant. 
2. Cost of Geoffrey doll, the specialty- branded doll#106 and cradle 
 For Chicago Plant, cost per unit is calculated on the basis of Activity Based Costing, 
 while for Star field plant, cost is calculated using the traditional system.
Cost Pool for Chicago Plant 
Manufacturing Overhead Total 
Cost 
Basis Total Activity Cost per activity
Machine Related Cost 112000 Machine Hours 11200 10.

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