2
Activity (Cost)
Machine maintenance ($310,000)
Setups ($610,000)
Packing ($162,000)
Photo development ($378,000)
Cost Driver
Deluxe Moderate Economy
Number of machine hours
250
750
1,000
Number of setups
35
10
5
Number of cartons
20
40
60
Number of pictures
4,000
1,000
1,000
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with
three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include
pictures only in chapter openings.
Required
a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books
during the prior year:
Deluxe Moderate Economy
50,000 150,000 200,000
Determine the overhead cost per book for each book type.
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced
with an activity-based costing system.