1. Delta Manufacturing

Scenario: Overhead Allocation and Cost Behavior Analysis

Data: Delta Manufacturing produces custom furniture and uses an activity-based costing (ABC) system to allocate manufacturing overhead. For the year 2023, the company reported the following cost information:

• Total Manufacturing Overhead: $500,000
• Direct Labor Hours: 10,000
• Machine Hours: 5,000

Requirements: Calculate the overhead allocation rate for Delta Manufacturing based on direct labor hours and machine hours. Analyze how the use of an ABC system affects the accuracy of overhead allocation compared to traditional costing methods. Discuss the cost behavior patterns observed in Delta Manufacturing's overhead costs. Evaluate the company's ability to control and manage overhead expenses using an ABC system. Recommend strategies for Delta Manufacturing to optimize its overhead allocation and cost management practices.