Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow.

Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow.

Machine depreciation .................$36,000Setup labor .....................................18,000Material handling ..........................14,400Total ..............................................$68,400

Requireda. Upriver currently applies overhead on the basis of machine hours. What is the predetermined overhead rate for the month?b. Upriver is thinking of adopting an ABC system. They have tentatively chosen the following cost drivers: machine hours for machine depreciation, production runs for setup labor, and direct material dollars for material handling. Compute the cost driver rates for the proposed system at Upriver.

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V-2 V-1 Units produced Direct materials cost per unit Machine-hours per unit 10,000 $ 2 1,000 2 Production runs per month 80 40