Multiple Factor Allocations—Complexity: Refer to the facts presented in Illustration 4-4. Assume the management of Terminals, Inc., shifted production of five products from Plant B to Plant A because "Plant A had lower costs than Plant B." Afterwards, the costs and allocation bases were as follows:

Required: What would be the new allocation to Plants A and B? Why would this allocation differ from the allocation in Illustration 4-4?

Transcribed Image Text:

Cost to Be Allocation Category Allocated Base Plant A Plant B Total 1 $220,000 Number of 6 5 11 different products 2 242,000 Number of 61 60 121 538,000 setups Machine-hours worked 75,000 25,000 100,000