Potthast Company uses a two-stage system to allocate its overhead to products. The company uses machine hours in the fabrication department and direct labor hours in the assembly department to allocate overhead costs to Work-in-Process. During the current year, the company incurred $50,000 of overhead costs in the fabrication department and $75,000 of overhead costs in the assembly department. The company also reported the following results in the production of its standard and deluxe bicycles.

Standard Deluxe

Machine hours (fabrication) 1,000 4,000

Direct labor hours (assembly) 4,000 6,000

Using a two-stage cost allocation, how much overhead should be allocated to the production of deluxe bicycles in the current year?

$50,000

$40,000

None of these.

$85,000

$75,000