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Your company has been using direct labor costs as the basis for assigning overhead to its many products. Under

this allocation system product A has been assigned overhead of $19.92 per unit while product B has been assigned $11.86 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:

Screen Shot 2020-01-25 at 11.46.31 AM.png

Screen Shot 2020-01-25 at 11.46.31 AM.png

Cost Pools Activity Costs Cost Driver Driver Consumption Machine setup $ 284,000 Setup hours 4,000
Materials handling 75,000 Pounds of materials 15,000
Electric power 26,000 Kilowatt-hours 26,000 '— The following cost information pertains to the production of A and B, just two of its many products: A B
Number of units produced 5,000 10,000
Direct materials cost $25,000 $33,000
Direct labor cost $28,000 $39,000
Number of setup hours 100 100
Pounds of materials used 1,000 2,000
Kilowatt—hours 2,000 2,000 l—

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