Smelly Perfume Company manufactures and distributes several different products. They currently use a plant-wide allocation method for allocating overhead at a rate of $7 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Diane is the department manager of Department D which manufactures Product X. The product costs (per case of 24 bottles) and other information are as follows:

J P X

Direct materials $100.00 $ 72.00 $48.00

Direct labor 42.00 31.50 12.00

Overhead 28.00 21.00 14.00

$170.00 $124.50 $74.00

Machine hours 4 2 3

Number of cases (per year) 300 500 600

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

a. $163.50

b. $144.00

c. $138.15

d. $117.15

2. If Smelly changes its overhead allocation to departmental rates, what is the product cost per case for Product P assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

a. $117.15

b. $163.50

c. $121.50

d. $138.15

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