Walker Co. makes three products in its factory: plastic cups, plastic tableclothes, and plastic bottles. The expected overhead costs for the next fiscal year include the following.
- Factory manager's salary $130,000
- Factory utility cost 60,500
- Factory supplies 28,000
- Total overhead costs $218,500
Walker uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows:
- Cups 420 hours
- Tablecloths 740
- Bottles 1,140
- Total machine hours 2,300
Required
a. Allocate the budgeted overhead costs to products.
b. Provide a possible explanation as to why Walker chose machine hours, instead of labor hours, as the allocation base.