Platinum Tracks, Inc., is a small audio recording studio located in Los Angeles. The company handles work for advertising agenciesprimarily for radio adsand has a few singers and bands as clients. Platinum Tracks handles all aspects of recording from editing to making a digital master from which CDs can be copied. The competition in the audio recording industry in Los Angeles has always been tough, but it has been getting even tougher over the last several years. The studio has been losing customers to newer studios that are equipped with more up-to-date equipment and that are able to offer very attractive prices and excellent service. Summary data concerning the last two years of operations follow: 2012 2013 Estimated hours of studio service 1,000 800 Estimated studio overhead cost $160,000 $160,000 Actual hours of studio service provided 750 500 Actual studio overhead cost incurred $160,000 $160,000 Hours of studio service at capacity 1,600 1,600 The company applies studio overhead to recording jobs on the basis of the hours of studio service provided. For example, 40 hours of studio time were required to record, edit, and master the Verde Baja music CD for a local Latino band. All of the studio overhead is fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in both 2012 and 2013.