Exercise 7.26 Windsor Company produces two products: MB-R and MB-X. Currently, Windsor allocates overhead based on direct labour hours. Overhead is estimated at $327,000. 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, $90,000; machine setup, $78,000; machine stamping, $102,000; and plant maintenance, $57,000. Windsor estimates the following activities related to the overhead costs: Activity Cost Driver Testing and inspections Number of testing and inspections Machine setup Number of setups Machine stamping Number of machine hours Plant maintenance Direct labour hours MB-R 300 140 22,000 1,400 MB-X 300 60 12,000 2,400 Use ABC cost hierarchy to classify each activity. Cost Driver Activity Testing and inspections Machine setup Machine stamping Plant maintenance Compute the amount of overhead assigned to each product using the traditional (i.e., direct labour hours) costing method. (Round labor rate per hour to 2 decimal places, e.g. 52.75 and the final answers to 0 decimal places, e.g. 5,275.) Overhead assigned MB-R MB-X $1 Compute the amount of overhead assigned to each product using the traditional (i.e., direct labour hours) costing method. (Round labor rate per hour to 2 decimal places, e.g. 52.75 and the final answers to 0 decimal places, e.g. 5,275.) Overhead assigned MB-R $ MB-X Compute the amount of overhead assigned to each product using ABC. MB-R OH MB-X OH Activity Testing and inspections $ Machine setup si Machine stamping s Plant maintenance s $ Which product is overcosted using the traditional costing method? Overcosted product