Brian Lee has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s approach to allocating overhead to products based on machine hours. The current department overhead budget of $977,310 is based on 32,577 machine hours. In an initial analysis of overhead costs, Brianhas identified the following activity cost pools.

Cost Pool		Expected Cost				Expected Activities
Product assembly			$	484,000		44,000	machine hours
Machine setup and calibration				372,600		5,400	setups
Product inspection				70,560		1,440	batches
Raw materials storage				50,150		295,000	pounds
			$	977,310

Brian Lee is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department’s four products. He has gathered the following budget information about each product.

Driver Usage		Component 3F5			Component T76
Machine hours		1,180			10,100
Setups		41			22
Batches		15			10
Pounds of raw materials		10,000			10,000

(a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base.

		Component 3F5		Component T76
Total Overhead allocated		$enter a dollar amount		$enter a dollar amount

(b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, e.g. 5.27 and round final answers to 0 decimal places, e.g. 5,275.)

		Component 3F5		Component T76
Total Overhead allocated		$enter a dollar amount rounded to 0 decimal places		$enter a dollar amount rounded to 0 decimal places

Answer rating: 100% (QA)

Answer Explanation aPredetermined overhead rate Estimated overhead Estimated mach... View the full answer