Trueman Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are hand-made, but the seasonal rugs require significantly more labor because of their decorative designs. The annual number of rugs made and the labor hours required to make each type of rug follow. Seasonal All-Purpose Totals Number of rugs 1,180 2,900 4,080 Number of direct labor hours 116,000 170,000 286,000 Required: a-1. Select the most appropriate cost driver to determine the allocation rate? Number of rugs Number of direct labor hours a-2. Assume that annual overhead costs total $85,800. Determine the amount of overhead to allocate to each type of rug. (Do not round intermediate calculations.) b. Trueman automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make 1,180 rugs in only 11,500 hours. Trueman continues to make the all-purpose rugs the same way as before. The number of rugs made and the labor hours required to make them after automation follow. Seasonal All-Purpose Totals Number of rugs 1,180 2,900 4,080 Number of direct labor hours 11,500 170,000 181,500 Overhead costs are expected to increase to $108,900 as a result of the automation. Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. (Do not round intermediate calculations.)

Trueman Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are hand- made, but the seasonal rugs require significantly more labor because of their decorative designs. The annual number of rugs made and the labor hours required to make each type of rug follow Seasonal All-Purpose Totals Number of rugs Number of direct labor hours 1,180 116,000 4,080 286,000 2,900 170,000 Required: a-1. Select the most appropriate cost driver to determine the allocation rate? Number of rugs Number of direct labor hours a-2. Assume that annual overhead costs total $85,800. Determine the amount of overhead to allocate to each type of rug. (Do not round intermediate calculations.) Type of Product Allocated Cost Seasonal All purpose Trueman automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make 1,180 rugs in only 11,500 hours. Trueman continues to make the all- purpose rugs the same way as before. The number of rugs made and the labor hours required to make them after automation follovw b. Seasonal All-Purpose Totals Number of rugs Number of direct labor hours 1,180 11,500 4,080 181,500 2,900 170,000 Overhead costs are expected to increase to $108,900 as a result of the automation. Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. (Do not round intermediate calculations.) Type of Product Seasonal All purpose Allocated Cost