Smelly Perfume Company manufactures and distributes several different products. They currently use an actual costing system and a plant-wide allocation method for allocating total overhead at a rate of $7 per direct labor hour. The product costs (per case of 24 bottles) and other information are as follows:

A2a. If Smelly changes its allocation basis to machine hours, what is the total product cost per case for each product?

b Why did the product cost for Product P change? Be specific, explaining exactly why the new cost is either higher or lower. The more specific is your answer, the more points you will receive. Numbers supporting your argument are required for full points.

Products Per unit costs $100.00 72.00 Direct materials 42.00 Direct labor 31.50 21.00 Overhead 28.00 TOTAL COST PER UNIT 170.00 124.50 Other information 2 MH 4 MH Machine hours per unit Total number of cases 300 cases 500 cases 48.00 12.00 14.00 74.00 3 MH 600 cases