Benson Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are handmade, but the seasonal rugs require significantly more labor because of their decorative designs. The annual number of rugs made and the labor hours required to make each type of rug follow:

	Seasonal			All-Purpose			Totals
Number of rugs		1,270			2,840			4,110
Number of direct labor hours		123,000			172,000			295,000

Overhead costs are expected to increase to $95,940 as a result of the automation. Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base.

Required

a. Assume that annual overhead costs total $76,700. Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug.

Assume that annual overhead costs total $76,700. Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug. (Do not round intermediate calculations.)

Type of Product	Allocated Cost
Seasonal
All purpose
The most appropriate cost driver is

b. Benson automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make 1,270 rugs in only 12,500 hours. Benson continues to make the all-purpose rugs the same way as before. The number of rugs made and the labor hours required to make them after automation follow:

	Seasonal			All-Purpose			Totals
Number of rugs		1,270			2,840			4,110
Number of direct labor hours		12,500			172,000			184,500

Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. (Do not round intermediate calculations.)

Type of Product	Allocated Cost
Seasonal
All purpose