6/6/2016Assignment Print View2/59.Award: 9.09 out of 9.09 pointsMaglie Company manufactures two video game consoles: handheld and home. Thehandheld consoles are smaller and less expensive than the home consoles. The companyonly recently began producing the home model. Since the introduction of the new product,profits have been steadily declining. Management believes that the accounting system is notaccurately allocating costs to products, particularly because sales of the new product havebeen increasing.Management has asked you to investigate the cost allocation problem. You find thatmanufacturing overhead is currently assigned to products based on their direct labor costs.For your investigation, you have data from last year. Manufacturing overhead was$1,440,000 based on production of 28,000 handheld consoles and 10,000 home consoles.Direct labor and direct materials costs were as follows:HandheldHomeTotalDirect labor$1,160,400$ 439,600$1,600,000Materials750,000684,0001,434,000Management has determined that overhead costs are caused by three cost drivers. Thesedrivers and their costs for last year are as follows:Activity LevelCost DriverCosts AssignedHandheldHomeTotalNumber of production runs$660,000401050Quality tests performed594,000121830Shipping orders processed186,00010050150Total overhead$1,440,000Required:a.
