Cost Allocation at Ford

• Values:
  • Total Overhead Costs: $1,000,000
  • Cost Drivers: Machine hours, Number of setups
• Requirements:

1. Allocate overhead costs using traditional costing methods.
2. Implement an activity-based costing (ABC) system to allocate costs more accurately.
3. Analyze the differences in cost allocation between traditional methods and ABC.
4. Recommend improvements in cost allocation practices at Ford.