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Isadores Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended

Isadores Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data:

Cost Driver Volume
Activity Cost Driver Cost Pencils Pens
Setting up Number of setups $ 102,000 22 29
Inspecting Number of parts 26,100 3 6
Packing and shipping Number of boxes shipped 50,000 50,000 75,000
Total overhead $ 178,100

Required:

a. Compute the amount of overhead to be allocated to each product under activity-based costing. (Do not round intermediate calculations.)

b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.2 for pencils and 0.2 for pens and that 50,000 boxes of pencils and 75,000 boxes of pens were produced during the period. (Do not round intermediate calculations.)

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