Problem 7-27 Sheffield Skiffs manufactures three models of speedboats-Superior, Deluxe, and Ultra-which are sold through marine retail stores. Budgeted information for the coming year is as follows. Superior Deluxe Ultra Total Sales revenue $56,595,000 $88,560,000 $104,550,000 $249,705,000 87,480,500 11,156,250 13,530,000 16,941,200 41,627,450 71,227,350 $49,369,700 41,123,000 Direct materia 18,375,000 27,982,500 Direct labor Overhead Gross profit Boats produced and sold Machine hours per boat Superior Deluxe Ultra 1,050 1,230 820 200 300 100 Currently, the company allocates overhead using a single predetermined rate based on machine hours. Irvin Sheffield is considering implementing an activity-based costing system. After studying the company's operations, he developed the following five activity cost pools. Activity Machining Machine setup and calibration Number of setups Quality inspections Materials receiving Materials requisitions Cost Driver Overhead Cost $14,328,000 24,668,500 14,487,750 6,800,000 10,943,100 $71,227,350 Machine hours Number of inspections Number of deliveries Number of requisitions Irvin also developed the following operating data for the coming year. Superior Deluxe Ultra Boats per batch Quality inspections per batch Number of deliveries Number of requisitions 10 600 3,270 15 600 4,220 30 800 6,020 To ensure the highest level of production quality, all machines are set up and calibrated at the beginning of every batch