Refer to the data in exercise 7-7.

Carson Weeks is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department’s four products. He has gathered the following budget information about each product.

Required

a. Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base.

b. Calculate the total overhead allocated to each component under activity-based costing.

c. What can you conclude about the costs of the other twoproducts?

Transcribed Image Text:

Cost Pool Expected Activities Expected Cost Product assembly Machine setup and calibration Product inspection Raw materials storage 40,000 machine hours 2,000 setups 1,500 batches 500,000 pounds $ 350,000 120,000 100,000 $