Refer to the information in Exercise $7-38.$ The controller at Marine Components chose direct labor cost as the allocation base in year $2,$ based on what she considered reflected the relation between overhead and direct labor cost. Year $3$ is approaching and again the company only expects two clients: client I and client $3.$ Work for client I will continue to be billed using fixed$-$price contracts, and client $3$ will be billed based on cost$-$plus contracts.

Manufacturing overhead for year $3$ is estimated to be $$12$ million. Other budgeted data for year $3$ include:

$\backslash$table$[[,$Client $1,$Client $3],[$Machine$-$hours $($thousands$),3,000,7,000],[$Direct labor cost $($$$000),$$$3,000,$$$3,000$