# Question: Whirlpool Corporation conducted an activity based costing study of its Evansville

Whirlpool Corporation conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low, one medium, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators:
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Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was \$ 200 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows:
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a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C). Round per-unit overhead to nearest cent and whole percents to one decimal place.
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b. Why is the traditional overhead rate per machine hour greater under the single rate method than under the activity-based method?
c. Interpret Column C in your table from part(a).

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