Vernon Rug Company makes two types of rugs, seasonal and all$-$purpose. Both types of rugs are handmade, 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:

$\backslash$table$[[$Number of rugs,Seasonal,All$-$Purpose,Totals$],[\backslash$table$[[$Number of rugs$],[$direct labor hours$]],\backslash$table$[[1,160],[122,000]],\backslash$table$[[2,800],[168,000]],\backslash$table$[[3,960],[290,000]]]]$

a$.$ Assume that annual overhead costs total $$69,600.$ Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug.

b$.$ Vernon automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make $1,160$ rugs in only $12,500$ hours. Vernon 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:

$\backslash$table$[[$Number of rugs,Seasonal,All$-$Purpose,Totals$],[$Number of direct labor hours,$1,160,2,800,3,960]]$

Overhead costs are expected to increase to $$86,640$ 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.