Robert Williams has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $701,340 is based on 35,067 machine hours. In an initial analysis of overhead costs, Robert has identified the following activity cost pools.
Cost Pool
Expected Cost
Expected Activities
Product assembly
$420,000
35,000 machine hours
Machine setup and calibration
$192,400
3,700 setups
Product inspection
$40,640
1,270 batches
Raw materials storage
$48,300
210,000 pounds
$701,340
Robert Williams is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product.
Driver Usage
Component 3F5
Component T76
Machine hours
840
11,800
Setups
38
19
Batches
15
15
Pounds of raw materials
10,000
10,000
(a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base.
Component 3F5
Component T76
Total Overhead allocated
$enter a dollar amount
$enter a dollar amount
