Crane, Inc. decided to implement the activity$-$based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following:

$\backslash$table$[[,$Family Model,Deluxe Model$],[$Direct labor costs,$$75,300,$$$150,600$

Packaging per hour

$(2)$

Calculate the overhead allocation for the family model and the deluxe model using three activity cost pools.

Overhead Allocation

Family model $

Deluxe model $

What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool?

Difference

The additional cost pool the overhead cost allocation significantly.