Refer to the data in exercise 7-7. Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product.

In exercise 7-7

Required
a. Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base.
b. Calculate the total overhead allocated to each component under activity-based costing.
c. What can you conclude about the costs of the other two products?

Transcribed Image Text:

Driver Usage Machine hours Setups Batches Pounds of raw materials Component 3F5 Component T76 1,000 40 20 10,000 10,000 20 10 10,000 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