In manufacturing roller blades, Radzelli Company's plant used 400 direct labor hours, 500 machine hours, and 20 setups. The following overhead costs were taken from the factory accounts:

The plant was using a factory-wide overhead rate based on direct labor hours. A new ABC system will use machine hours in the Machining Department and number of setups in the Setup Department as cost drivers. 

Required: 

By what amount would the overhead costs assigned to roller blades differ between the prior system and the ABC system?

Transcribed Image Text:

Overhead Expenses Machining center $120,000 Setup center 40,000 Total expenses $160,000 Volume of Activities 20,000 machine hours 100 setups 4,000 direct labor hours