Sheridan makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $1,485,700:

Exercise 7-14 Sheridan makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $1,485,700 Rate Assembly $1.25 per direct labor hour $9.75 per machine hour $18 per batch $107,700 direct to Complex Setups Bonding Only the Complex product requires bonding, so all the costs of bonding should be allocated to Complex. The following data relate to both products. Units produced Direct labor hours Machine hours Batches Simple 128,000 238,000 51,000 3,000 Complex 46,000 109,000 32,000 4,500