Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was \($70\) per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below.

The following data relate to cost driver event activity within the two divisions during the most recent year.

Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique,

a. profit for Eastern Division would have increased by \($5,000\).

b. profit for Western Division would have increased by \($5,000\).

c. profit for Eastern Division would have decreased by \($145,000\).

d. profit for Western Division would have decreased by \($205,000\).

Transcribed Image Text:

Cost Pool Number of Events per Year Cost Pool A..... B.... C.. Total 2,000 1,000 50 $100,000 200,000 50,000 $350,000