Determine the total overhead cost assigned to each type of dictionary using the cur-rent allocation… 1 answer below »
(ABC) Briones Books is concerned about the profitability 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
a. Determine the total overhead cost assigned to each type of dictionary using the cur-rent allocation system.
b. Determine the total overhead cost assigned to each type of dictionary if more appropriate cost drivers were used.
c. Should the company stop producing the regular dictionaries? Explain.