Exercise 7.26 Marigold Company produces two products: MB-R and MB-X. Currently, Marigold allocates overhead based on direct labour hours. Overhead is estimated at $349,800. The cost accountant realizes that there are some differences in how resources are being used in producing these two components and is considering the use of ABC to allocate overhead. She determines that overhead is caused by testing and inspections, $120,000; machine setup, $80,000; machine stamping, $108,000; and plant maintenance, $41,800. Marigold estimates the following activities related to the overhead costs: Activity Cost Driver MB-R MB-X Testing and inspections Number of testing and inspections 500 500 Machine setup Number of setups 140 60 Machine stamping Number of machine hours 23,000 13,000 Plant maintenance Direct labour hours 1,400 2,400 Use ABC cost hierarchy to classify each activity. Cost Driver Activity Testing and inspections Machine setup Machine stamping Plant maintenance