let each of the overhead categories in the budget represent an activity cost for categorize each in terms of the type of activity.

Enickknack, Inc., manufactures two products: Odds and Ends. The firm uses a single, plantwide overhead rate based on direct-labor hours. Production and product-costing data are as follows: Predetermined overhead rate: Budgeteddirect-1aborhoursBudgatedmanufacturingoverhead=(1,000)(2)+(5,000)(3)$816,000=$4 per direct-1abor hour Knickknack, Inc., prices its products at 120 percent of cost, which yieids target prices of $199.20 for Odds and $298.80 for Ends. Recently, however, Knickknack has been challenged in the market for Ends by a European competitor, Bricabrac Corporation. A new entrant in this market, Bricabrac has been selling Ends for $220 each. Knickknack's president is puzzled by Bricabrac's ability to sell Ends at such a low cost. She has asked you (the controller) to look into the matter. You have decided that Knickknack's traditional, volume-based product-costing system may be causing cost distortion between the firm's two products, Ends are a high-volume, relatively simple product. Odds, on the other hand, are quite complex and exhibit a much lower volume. As a result, you have begun work on an activity-based costing system. exnidit a mucn iower voiume. AS a resuit, you nave degun work on an activity-pasea costing system. You have gathered the following additional information: - Each odd requires 4 machine hours, whereas each end requires 1 machine hour. - Odds are manufactured in production runs of 50 units each. Ends are manufactured in 250-unit batches. - Three-quarters of the engineering activity, as measured in terms of change orders, is related to Odds. - The plant has 1,920 square feet of space, 80 percent of which is used in the production of Odds. Required: 1. Let each of the overhead categories in the budget represent an activity cost pool. Categorize each in terms of the type of activity