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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
20,000
$6.00
per machine hr.
Production in units
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?
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