Oriole Company produces two products: MB-R and MB-X. Currently, Oriole allocates overhead based on direct labour hours. Overhead is estimated at $399,200. The cost accountant realizes that there are some differences in how resources are being used in producing these two components and is considering the use of ABC to allocate overhead. She determines that overhead is caused by testing and inspections, $126,000; machine setup, $80,000; machine stamping, $150,000; and plant maintenance, $43,200. Oriole estimates the following activities related to the overhead costs:

Activity		Cost Driver		MB-R		MB-X
Testing and inspections		Number of testing and inspections		420		420
Machine setup		Number of setups		140		60
Machine stamping		Number of machine hours		20,000		10,000
Plant maintenance		Direct labour hours		1,300		2,300

Use ABC cost hierarchy to classify each activity.

Activity		Cost Driver
Testing and inspections		Unit level activities and costsFacility sustaining level activities and costsBatch level activities and costs
Machine setup		Facility sustaining level activities and costsUnit level activities and costsBatch level activities and costs
Machine stamping		Batch level activities and costsUnit level activities and costsFacility sustaining level activities and costs
Plant maintenance		Facility sustaining level activities and costsUnit level activities and costsBatch level activities and costs

Compute the amount of overhead assigned to each product using the traditional (i.e., direct labour hours) costing method. (Round labor rate per hour to 2 decimal places, e.g. 52.75 and the final answers to 0 decimal places, e.g. 5,275.)

		Overhead assigned
MB-R		$
MB-X		$

Compute the amount of overhead assigned to each product using ABC.

Activity		MB-R OH		MB-X OH
Testing and inspections		$		$
Machine setup		$		$
Machine stamping		$		$
Plant maintenance		$		$

Which product is overcosted using the traditional costing method?

Overcosted product

MB-RMB-X