Concerned about the protability of its regular dictionaries

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Reference no: EM131125008

LO.4 (ABC) Briones Books is concerned about the protability of its regular dictionaries. Company managers are considering producing only the top-quality, hand-sewn dictionaries with gold-edged pages. Briones is currently assigning the $2,000,000 of overhead costs to both types of dictionaries based on machine hours. Of the overhead, $800,000 is utilities related and the remainder is primarily related to quality control inspectors' salaries. The following information about the products is also available:

	Regular	Hand Sewn
Number produced	2,000,000	1,400,000
Machine hours	170,000	30,000
Inspection hours	10,000	50,000
Revenues	$6,400,000	$5,600,000
Direct costs	$5,000,000	$4,400,000

Determine the total overhead cost assigned to each type of dictionary using the cur- rent allocation system. Determine the total overhead cost assigned to each type of dictionary if more appro- priate cost drivers were used. Should the company stop producing the regular dictionaries? Explain.

Reference no: EM131125008

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