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Matthew Young has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is
Matthew Young 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 $1,175,440 is based on 58,772 machine hours. In an initial analysis of overhead costs, Matthew has identified the following activity cost pools. Cost Pool Product assembly Expected Cost Expected Activities $ 598,000 46,000 machine hours Machine setup and calibration 423,400 5,800 setups Product inspection 78,440 1,480 batches Raw materials storage 75,600 315,000 pounds $ 1,175,440 Matthew Young 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. Driver Usage Component 3F5 Component T76 Machine hours 1,260 9,700 Setups 45 19 Batches 20 10 Pounds of raw materials 10,000 10,000
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