Comprehensive Accounting Seminar

$8$

$3-$ ABC company produces specialized equipment. Currently, overhead costs are allocated at a rate of $$5$ per machine hour produced, and the company used $20,000$ machine hours last year. The company's CEO has heard about ABC and would like to see if it makes any difference in the costs allocated to jobs at the company.

The accounting staff has provided the following information about manufacturing overhead:

$\backslash$table$[[$Cost Pool,Amount,Cost Driver$],[$Setups$,$$$30,000,$Number of setups$],[$Equipment$,20,000,$Number of machine hours$],[$Inspection$,50,000,$Number of inspections$]]$

The company estimates that it will perform $150$ setups and $1,000$ inspections each year and will use $2,000$ machine hours. Job No$.10$ will require $18$ setups, $85$ machine hours, and $60$ inspections.

Required:

A$.$ Using ABC, what amount of manufacturing overhead will be allocated to Job No$.10?$

B$.$ What amount would the company allocate to Job No$.10$ using their current traditional system?

C$.$ Why do the two methods yield such different answers?