Susan, the manager of Splish Brothers, is analyzing the companys MOH costs from last year. Splish Brothers had always followed an actual costing system when determining the costs of its customizable telescopes. Susan wondered if it would be better to switch to a normal costing system, as she had heard a number of people talking about that at an industry conference she attended the previous month.

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

Budgeted MOH cost $434,560 Actual MOH cost 427,280 Budgeted machine hours 97.000 Actual machine hours 109.000

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 under- or overapplied MOH costs be 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 does that mean for Stargazers ability to price its products if it bases its selling price on cost?