Reference no: EM132797183

Carriage Hill Tooling produces specialized equipment. Currently, overhead costs are allocated at a rate of $25 per machine hour and the company used 4,200 machine hours last year. Carriage Hill's CEO, Ralston, would like to see if ABC would make any difference in the costs allocated to jobs at the company.

The accounting staff has provided the following information about manufacturing overhead:

                               Amount              Cost Driver
Setups               $31,200              Number of setups
Equipment         11,340               Number of machine hours
Inspection         62,460               Number of inspections

The company estimates that it will perform 120 setups and 400 inspections each year and will use 4,200 machine hours. Job 345 will require 5 setups, 700 machine hours, and 12 inspections.

Problem a. Using ABC, what amount of manufacturing overhead will be allocated to Job 345?

Problem b. What amount would Ralston allocate to job 345 using the company's current, traditional system?