Reference no: EM13599152

Nevin Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following.

• factory managers salary $260,000
• factory utility cost 121,000
• factory supplies 56,000
• total overhead costs $437,000

Nevin 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 the products.
B. Provide a possible explanation as to why Nevin chose machine hours, instead of labor hours, as the allocation base.