New Industries manufactures dining chairs and tables. The following information is available:

Dining Chairs Tables Total Cost

Machine setups 200 600 $48,000

Inspections 250 470 $72,000

Labor hours 2,600 2,400

New Paltz is considering switching from one overhead rate based on labor hours to activity-based costing.

Instructions: Submit your answers response box provided. Clearly mark your response as A, B or C. Show your work! (I can't give partial credit without it)

Perform the following analyses for these two components of overhead:

a. Compute total machine setups and inspection costs assigned to each product, using a single overhead rate. ("Traditional Costing")*

b. Compute total machine setups and inspection costs assigned to each product, using activity-based costing. (ABC)

c. Comment on your findings. - differences, conclusions, etc.

*Single (Traditional) rate uses labor hours as its activity base

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