Smithson, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following:

		Family Model		Deluxe Model
Direct labor costs		$73,200		$146,400
Machine hours		2,000		2,000
Setup hours		200		800
Packaging hours		50		75

The estimated overhead of $439,200 is allocated as follows: machining activity cost pool $234,240, machine set up $165,920 and packaging $39,040.

Determine the overhead allocation for the family model and the deluxe model using three activity cost pools.

		Oerhead Allocation
Family model		$
Deluxe model		$

What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool?

What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool?