P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead.

Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each.

Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Products Use of Cost Driver Cutting $600,000 60,000 machine hours 8,000 Fabrication 1,200,000 120,000 direct labor hours 20,000 Inspection 300,000 20,000 inspection hours 2,000 Total $2,100,000 Required a. Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product. b. If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates and subsequent allocated overhead cost to the main product. c. Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate any of Jasmines concerns about the low margin of this product? d. What additional insight does the activity information provide to Jasmine as she considers the margin for this product?