Suni, the manager of Stargazers, is analyzing the company's MOH costs from last year. It had always followed an actual costing system when determining the costs of its customizable telescopes. But Suni wondered if it would be better to switch to a normal costing system, as she had heard quite a few people talking about that at an industry conference she attended the previous month.

Since Stargazers has a highly machine-intensive operation, machine hours are used as its MOH cost driver. Here are the costs and other MOH information Suni is analyzing:

Budgeted MOH cost

$422,400

Actual MOH cost

414,720

Budgeted machine hours

96,000

Actual machine hours

108,000

Required:

a.Determine the actual MOH rate and the budgeted MOH rate Stargazers would have used last year under actual costing and normal costing, respectively.

b.Calculate total applied MOH under both actual costing and normal costing for last year.

c.How much would Stargazers have been under- or overapplied in its MOH costs if it followed an actual costing system? If it followed a normal costing system?

d.What are the key advantages and disadvantages to both of these systems, and what would that mean for Stargazers' ability to price its products if it bases its selling price on cost?