Edgeworth Box Corporation manufactures a variety of special packaging boxes used in the pharmaceutical industry. The Company's Dallas plant is semi-automated but the special nature of the boxed requires some manual labor. The Controller has chosen the following cost pools, cost drivers, and pool rates for the Dalla's plants product costing system.

Activity Cost Pool

Purchasing Storage, and material handling

Engineering and product design

Machine Set-up Costs

Machine Depreciation and Maintenance

Factory Depreciation, Taxes, Insurance and Utilities

Other Manufacturing Overhead Costs

Total

Overhead Cost

200,000

100,000

70,000

300,000

200,000

150,000

1,020,000

Cost Driver

Raw Material Costs

Hours in Design Department

Production Runs

Machine Hours

Machine Hours

Machine Hours

Budgeted Level for Cost Driver

1,000,000

5000 hr.

1,000 runs

100,000 hr.

100,000 hr.

100,000 hr.

Pool Rate

20% of material cost

20 per hour

70 per run

3 per hour

2 per hour

1.50 per hour

Two recent production orders had the following requirements:

Direct Labor Hours

Raw-Material Cost

Hours in Design Department

Production Runs

Machine Hours

20,000 Units of Box C52

42 hr.

40,000

10

2

24

10,000 Units of Box W29

21 hr.

35,000

25

4

20

Requirements:

1. Compute the total overhead that should be assigned to each of the two production orders c52 and w29
2. Compute the overhead cost per box in each order
3. Suppose the Dallas plant were to use a single predetermined overhead rate based on direct-labor hours. The direct labor budget calls for 4,000 hours
4. Compute the predetermined overhead rate per direct labor hours
5. Compute the total overhead costs that would be assigned to the order for box c52 and the order for box w29
6. Compute the overhead cost per box in each order.
7. Why do the two product-costing system yield such widely differing overhead cost per box?