1. Delta Tech

Scenario: Cost Allocation Methods

Data: Delta Tech allocates overhead costs using both traditional and activity-based costing (ABC) methods. For the year 2023, the company reported the following overhead costs:

• Total Overhead Costs: $1,000,000
• Direct Labor Hours: 20,000
• Machine Hours: 10,000

Requirements: Allocate overhead costs to Delta Tech's production departments using the traditional costing method based on direct labor hours and the ABC method based on machine hours. Compare the allocated costs under each method and discuss the differences. Analyze the advantages and disadvantages of traditional costing versus ABC for Delta Tech's cost allocation. Evaluate the accuracy and relevance of each costing method in decision-making. Recommend improvements to Delta Tech's cost allocation practices.