Its about time, Inc. manufactures 2 lines of clocks: Digital and Analog. under the current costing system, manufacturing overhead is applied to each line based on machine hours. Machine Setup costs account for the majority of manufacturing overhead and are expected to total $75,000 for the upcoming period. The controller for the company has suggested to management that an activity based costing system be analyzed and has determined that the number of machine setups drives the total machine setup costs. The following information was compiled for the analysis:

	Digital ----analog
Total Expected Machine Hours for Budgeted Output	1,500 hours	2,500 hours
Budgeted Output	750 clocks	500 clocks
Number of Clocks to be Produced per Machine Setup	25 clocks	10 clocks

Calculate the amount by which each product line is over/under-costed by the traditional costing system. Please explain how you determined your answer.

Answer rating: 100% (QA)

Based on traditional method Overhead rate Total coststotal machine hours 750001500250... View the full answer