Allstar Exposure designs and sells advertising services to small, relatively unknown companies.

Last month, Allstar had sales commissions costs of $48,000, technology costs of $80,000, and research and development costs of $210,000.

Selling expenses were $10,000, and administrative expenses equaled $35,000. Sales totaled $500,000.

• Classify the costs in the income statement as production costs (cost of laying pipe), selling costs (costs of securing contracts), or general administration costs.
• For production costs, identify whether the costs are direct materials, direct labor, or overhead costs. Keep in mind that the company never has significant work in process (most jobs are started and completed within a day).
• Assume that a significant driver of cost is equipment hours. Identify the expenses that would likely be traced to jobs using this driver. Explain why you feel these costs are traceable using equipment hours.
• Calculate the cost per equipment hour for these traceable costs.