Activity	Allocation Base	Budgeted Overhead	Budgeted Use for each activity
Set-up	direct labor hours	$157,500	10,500 direct labor hours
Forming	machine-hours	$187,500	75,000 machine-hours
Machine maintenance	batches	$84,000	140 batches
Inspection	units produced	$21,000	70,000 units
Total manufacturing overhead		$450,000

Job cost records at the end of the year show that direct labor personnel worked 9,000 hours. 150 batches were produced during the year for a total of 75,000 units.

Show calculations of company overhead using activities-based costing and present revised T-accounts for Work-in-Process, Manufacturing Overhead Allocated, and Cost of Goods Sold.

Would operating income increase or decrease (given the same facts in transactions 1 through 11 above) if Gordon used activities-based costing for allocating overhead? By how much?

What conclusions might Gordon Companys management accountants draw once they compared the original income statement with the ABC-based income statement?