Problem
A Allocating costs with different cost drivers
Wallace Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes.
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|
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Type of Textbook
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|
Activity (Cost)
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Cost Driver
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Deluxe
|
Moderate
|
Economy
|
|
Machine maintenance ($264,000)
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Number of machine hours
|
260
|
740
|
1,200
|
|
Setups ($424,000)
|
Number of setups
|
25
|
14
|
6
|
|
Packing ($144,000)
|
Number of cartons
|
12
|
29
|
55
|
|
Photo development ($390,000)
|
Number of pictures
|
4,100
|
1,800
|
1,300
|
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings.
Required:
a. Wallace currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year.
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Deluxe
|
Moderate
|
Economy
|
|
42,000
|
148,000
|
197,000
|
Determine the overhead cost per book for each book type. (Round intermediate calculations and final answers to 2 decimal places.)
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. (Round your answers to 2 decimal places.)