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Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning
Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,133,500 is based on 45,340 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Eric Parker found that the budget included production of 500 units of Component 3F5 and 5,000 units of Component T76. (a) Calculate the overhead cost per unit of Component 3F5 and Component 176 under traditional costing using machine hours as the overnead application base. (b) Calculate the overhead cost per unit of Component 3F5 and Component T76 under activity-based costing (Round activity-based overhead rates to 2 decimal places, e.s. 5.27 and round final answers to 3 decimol places, e.8. 52.756.1
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