Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes.

Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings.
Required
a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year:
Deluxe ModerateEconomy
50,000...... 150,000......200,000
Determine the overhead cost per book for each book type.
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. Round your figures to two decimal points.
c. Explain why the per-unit overhead costs determined in Requirements a and b differ.

Transcribed Image Text:

Type of Textbook Activity (Cost) Cost Driver Deluxe Moderate Economy Machine maintenance ($360,000) Number of machine hours Setups ($630,000) Packing ($162,000) Photo development ($504,000) 300 900 ,200 Number of setups Number of cartons Number of pictures 30 10 4,000 50 2,0001,000 15 30