Carson Weeks has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $850,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Carson has identified the following activity cost pools.

Required
a. Calculate the company's overhead rate based on machine hours.
b. Calculate the company's overhead rates using the proposed activity-based costingpools.

Cost Pool Product assembly Machine setup and calibration Product inspection Raw materials storage Expected Cost $350,000 280,000 120,000 100,000 $850,000 Expected Activities 40,000 machine hours 2,000 setups 1,500 batches 500,000 pounds