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After a study of its processes, a firm determines it has the following 4 overhead cost pools related to the production of its 2 products: Set-up, Shipping, Product design, and Plant utilities and administration.
Both products are produced in the same facility using the same equipment. Product XYZ is a higher volume product that takes a relatively small amount of machine-time to produce, while Product ABC is a lower volume product that takes a significantly higher amount of machine-time. Also, Product XYZ requires very little set-up time, while Product ABC requires a more time-consuming set-up. Both products are shipped in a similar way, with each shipment requiring a similar amount of work.
Based on this information, determine the hierarchy level for each cost pool and an appropriate allocation base for each pool.
Cost Pool
Hierarchy Level
Allocation Base
Setup
Shipping
Product design
Plant utilities & administration
The Houston Armadillos, the minor-league baseball team, play their weekly games in small stadium just outside Houston. The stadium holds 10,000 people and tickets sell for $10 each.
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