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Star Mugs Company manufactures two products: insulated water bottles and travel mugs. The water bottles are more complex of the two products, and they require
Star Mugs Company manufactures two products: insulated water bottles and travel mugs. The water bottles are more complex of the two products, and they require more direct labor time and more machine time per unit than the travel mugs. Manufacturing overhead is currently assigned to the products on the basis of direct labor hours. The company has gathered some activity information and is interested in the differences between its present costing method and activity-based costing. All overhead costs should be allocated to the products. The overhead cost pools and activity drivers, along with other product information are as follows: a) Using the traditional method of allocating overhead based on direct labor hours, compute the unit cost of a travel mug and an insulated water bottle. b) Using an activity-based costing approach, compute the unit product cost of a travel mug and an insulated water bottle. c) Why would your answer to a and b differ? Be specific
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