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Smithson, Inc. produces two types of gas grills: a family model and a deluxe model. Smithson's controller has decided to use a plantwide overhead
Smithson, Inc. produces two types of gas grills: a family model and a deluxe model. Smithson's controller has decided to use a plantwide overhead rate based on direct labor costs. The president of the company recently heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company's operations: Family Model Deluxe Model Direct labor costs $71,100 $142,200 Machine hours 2,000 2,000 Setup hours 200 800 Total estimated overhead costs are $426,600. Overhead cost allocated to the machining activity cost pool is $255,960 and $170,640 is allocated to the machine setup activity cost pool.
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