difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested tha The controller decided that a good summer project for the int each pool. There were: be providing misleading information. mpare the current system. intern would be to develop, in one self The inten identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for 2,580,000 Direct material cost 22,680,000 Machine-hours 2,700,000 Prod 4,400,000 Units shipped Machine setup runs In this particular area, Cain produces two of its many products: Standard and Deluxe. The following are data for production for the latest full year of operations: $1,160,000 $2,160,000 480,000 400 72,000 16,000 80,000 $560,000 $960,000 360,000 Total direct labor costs ours Total number of setups Total pounds of material Total direct Number of units produced and shipped 36,000 18,000 20,000 The intern decides to look more closely at the manufacturing activity and determines that it can be broken down into two activities: production and engineering. Production covers the costs of ongoing manufacturing while engineering includes those activities dealing with engineering changes, design modifications, and so on. The costs attibuted to production are $1 decides that the best cost driver for engineering is setups, because most of the work arises from changes in the way the product is run