Question - After a study of its processes, a firm determines it has the following 3 overhead cost pools related to the production of its 2 products: Set-up, Production, and Plant administration.
Both products are produced in the same facility using the same equipment. Product YUH is a higher volume product that takes a relatively small amount of machine-time to produce, while Product NHJ is a lower volume product that takes a significantly higher amount of machine-time. Product YUH requires very little set-up time, while Product NHJ requires a more time-consuming set-up.
Based on this information, determine the hierarchy level for each cost pool and an appropriate allocation base for each pool.