Manson Co. produces two products?Model S and Model T?and allocates its fixed manufacturing costs using a predetermined overhead rate based on estimated total overhead for the year and estimated machine-hours for the year. The estimates are as follows:

Estimated total overhead for the year.................................................$2,000,000Estimated total machine-hours to be worked in the year........................20,000

The controller is not sure that the estimated costs of the two products reflect the actual costs for which each product is responsible. She is thinking about switching to ABC. The accounting department came up with the following information about activities and associated cost drivers for the two products:

The following data pertain to Manson for October, the most recent month:

Required:

1. Prepare an analysis of the overhead costs allocated to the products for October, using the ABC method.

2. Will there be over- or underapplied manufacturing overhead under the ABC costing system?

3. Is inspection a unit-level or a batch-level activity? How can you tell??

4. Is it possible for inspection activity to be a batch-level activity? Why or why not?

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Estimated Volume Estimated of Activity Measure 120,000 kilograms Activity Measure Activity Cost Activity $240,000 Materials purchasing Quantity of materials (kilograms) Machine setups Number of machine setups 400 setups 800,000 360,000 3,600 hours Inspection Inspection-hours Machine operations 600,000 20,000 MHs Machine-hours Model S Model T Purchasing materials 6,000 kilograms 4,000 kilograms Machine setups 10 30 Inspection 200 hours 200 hours Machine operations 1,500 hours 500 hours