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*Exercise 7-9 Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and
*Exercise 7-9 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 $999,470 is based on 46,500 machine hours. In an initial analysis of overhead costs, Eric Parker has identified the following activity cost pools Cost Pool Product assembly Machine setup and calibration Product inspection Raw materials storage Expected Cost Expected Activities $427,800 343,750 123,500 104,420 $999,470 46,500 Machine hours 2,750 setups 1,300 batches 454,000 pounds Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Component Component T76 Driver Usage Machine hours Setups Batches Pounds of raw materials 3F5 9,600 20 10 10,000 1,280 15 10,000 (a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base. (Round overhead rates to 2 decimal places, e.g. 5.27 and round final answers to 0 decimal places, e.g. 5,275.) Component 3F5 Component T76 Total Overhead allocated$ (b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, e.g 5.27 and round final answers to 0 decimal places, e.g. 5,275.,) Component 3F5 Component T76 Total Overhead allocated$ Question Attempts: 0 of 15 used
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