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Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q.
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Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows: Activity Pools Repair and maintenance on assembly machine Programming cost Software inspections Product testing Total overhead cost Expected activity for each product follows: Cost Pool Total Cost Driver Number of units produced Number of programming hours Number of inspections $104,000 168,000 12,000 16,000 Number of tests $300,000 Number of Number of Programming Number of Number of Units Hours Inspections Tests Decoder P Decoder Q 16,000 2,000 190 1,400 36,000 1,500 60 1,100 Total 52,000 3,500 250 2,500 Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow: Direct Labor Hours Decoder P 8,000 Decoder Q 16,000 Total 24,000
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