Exercise 7.26 Sheridan Company produces two products: MB-R and MB-X. Currently, Sheridan allocates overhead based on direct labour hours. Overhead is estimated at $330,800. 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, $86,400; machine setup, $80,000; machine stamping, $114,000; and plant maintenance, $50,400. Sheridan estimates the following activities related to the overhead costs: Activity Testing and inspections Machine setup Machine stamping Plant maintenance Cost Driver MB-R MB-X Number of testing and inspections 360 360 Number of setups 150 50 Number of machine hours 24,000 14,000 Direct labour hours 1,600 2,600 Use ABC cost hierarchy to classify each activity. Activity Cost Driver Testing and inspections Machine setup Machine stamping Plant maintenance Facility sustaining level activities and costs Batch level activities and costs Unit level activities and costs