Marine Components produces parts for airplanes and ships. The parts are produced to specification by their customers, who pay either a fixed price $($the price does not depend directly on the cost of the job$)$ or price equal to recorded cost plus a fixed fee $($cost plus$).$ For the upcoming year $($year $2),$ Marine expects only two clients $($client $1$ and client $2).$ The work done for client $1$ will all be done under fixed$-$price contracts while the work done for client $2$ will all be done under cost$-$plus contracts.

The controller at Marine Components chose direct labor cost as the allocation base in year $2,$ based on what she considered reflect the relation between overhead and direct labor cost. Year $3$ is approaching and again the company only expects two clients: client $1$ and client $3.$ Work for client $1$ will continue to be billed using fixed$-$price contracts, and client $3$ will be billed based on cost$-$plus contracts.

Manufacturing overhead for,year $3$ is estimated to be $$18$ million. Other budgeted data for year $3$ include:

$\backslash$table$[[$Client $1,$Client $3,],[$Machine$-$hours $($thousands$),6,300,11,700],[$Direct labor cost $($$$000),$$$4,000,$$$4,000$