Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools.

Required
a. Calculate the company's overhead rate based on machine hours.
b. Calculate the company's overhead rates using the proposed activity-based costing pools.

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Cost Pool Product assembly Machine setup and calibration Product inspection Raw materials Expected Cost $600,000 320,000 90,000 Expected Activities 40,000 machine hours 2,000 setups 1,500 batches Rv ia torage 5 1405000 pounds 1,140,000