Exercise 7-7 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 $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities Product assembly $ 600,000 40,000 Machine hours Machine setup and calibration 320,000 2,000 setups Product inspection 90,000 1,500 batches Raw materials storage 130,000 500,000 pounds $ 1,140,000 (a) Calculate the company's overhead rate based on machine hours. (Round answer to 2 decimal places, e.g. 15.25.) Overhead rate $ / MH (b) Calculate the company's overhead rates using the proposed activity-based costing pools. (Round answers to 2 decimal places, e.g. 15.25.) Product assembly $ / MH Machine setup and calibration $ / setup Product inspection $ / batch Raw materials storage $ /lb