Advantage Inc. produces two products A and B. Last year the overhead costs were allocated based on machine hours. This year they are considering ABC.
|
Cost Pool
|
Driver and Level
|
Cost in Pool
|
A
|
B
|
Allocation Base
|
|
Supervisors Salaries
|
120,000
|
Direct labor hours
|
$240,000
|
80,000
|
40,000
|
$2.00
|
per DL hour
|
|
Quality Control
|
1,500
|
inspections
|
$150,000
|
900
|
600
|
$100.00
|
per inspection
|
|
Machining
|
100,000
|
machine hours
|
$600,000
|
80,000
|
20,000
|
$6.00
|
per machine hr.
|
|
Production in units
|
|
20,000
|
5,000
|
|
|
|
Total overhead costs
|
$990,000
|
|
|
|
|
a.If overhead is allocated using the traditional method of direct labor hours what is the overhead cost per direct labor hour?
b.Under the traditional method what is the overhead cost per unit for A's?
c.Under the traditional method what is the overhead cost per unit for B's?