Molly Levine operates a machine shop. For the current year, she allocates capacity costs to products using three pools: $10 per machine hour; $6 per labor hour; and, 10% of revenues. Molly estimates that she currently uses 120,000 machine hours and 75,000 labor hours to generate sales of $1.6 million per year.
Required:
For the next year, Molly expects machine hours to increase by 10%, labor hours to increase by 15%, and revenue to increase by 12%. Estimate Molly's expected total capacity costs as predicted by her cost allocation system.