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Erbil Manufacturing Corporation adopts activity-based costing (ABC) to allocate manufacturing overhead costs. The company identifies the following cost pools and cost drivers: Setup Costs: IQD
Erbil Manufacturing Corporation adopts activity-based costing (ABC) to allocate manufacturing overhead costs. The company identifies the following cost pools and cost drivers:
- Setup Costs: IQD 500,000 per setup, with 50 setups expected
- Machine Maintenance Costs: IQD 300,000 per machine hour, with 1,000 machine hours expected
- Quality Inspection Costs: IQD 200,000 per inspection, with 200 inspections expected Calculate the predetermined overhead rates for each cost pool and allocate the total overhead costs of IQD 300,000,000 using the ABC method. Discuss the advantages of ABC in accurately assigning overhead costs to products or services.
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