Tinsley, Inc., produces high-end party favors for corporate events. Party favor production is a very labor-intensive process and as such, the company currently uses direct labor hours to allocate overhead costs. However, during a recent meeting with a large well-known national client, an accounting student suggested they try using activity-based costing. The firm currently collects the following information: Activities Estimated OH Cost Estimated Cost Driver Transportation $ 400,000 75,000 miles Setup $ 350,000 50,000 direct labor hours Rentals $ 450,000 25,000 guests Total Estimated OH $ 1,200,000 The firm has two upcoming jobs and would like to see how the costs vary when using ABC and traditional costing. The cost of direct materials is $9 per guest and the cost of direct labor is $12 per direct labor hour. Actual Usage Miller Co. Event Coors Co. Event Miles 2500 12000 Direct Labor Hours 6000 4500 Guests 1000 6000 1. Calculate the PDOH using traditional costing.

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To calculate the Predetermined Overhead Rate PDOH using traditional costing we first need to determi... View the full answer