Randwick Electric Motor Corporation manufactures electric motors for commercial use. The company

produces three models, designated as standard, deluxe, and heavy-duty. The company uses a job-order

cost-accounting system with manufacturing overhead applied on the basis of direct-labor hours. The

system has been in place with little change for 25 years. Product costs and annual sales data are as

follows:

Deluxe Standard Model Heavy-Duty Model Model Annual sales (units) 20,000 1,000 10,000 Product costs: Raw material $ 10 $ 25 $ 42 20 (1 hr. 20 (1 hr. at Direct labor 10 (.5 hr. at $20) at $20) $20) Manufacturing overhead 85 170 170 Total product cost $ 105 $215 $232Calculation of predetermined overhead rate: Manufacturing-overhead budget: Depreciation, machinery $ 1,480,000 Maintenance, machinery 120,000 Depreciation, taxes, and insurance for 300,000 factory Engineering 350,000 Purchasing, receiving and shipping 250,000 Inspection and repair of defects 375,000 Material handling 400,000 Miscellaneous manufacturing overhead 295,000 costs Direct-labor budget: Standard model: 10,000 hours Deluxe model: 1,000 hours Heavy-duty model: 10,000 hoursProduct Lines Standard Deluxe Heavy-Duty Activity Cost Pool Cost Driver Model Model Model Depreciation, machinery Machine time 40% 13% 47% Maintenance, machinery Engineering Inspection and repair of Engineering hours 47% 6% 47% defects Purchasing, receiving, Number of material and shipping 47% 8% 45% orders Material handling Depreciation, taxes, and insurance for factory Factory space usage 142% 15% 43% Miscellaneous manufacturing overhead