Mendoza Company has recently decided to convert from conventional product costing to an activity-based system. The company produces two types of clocks: small and large. The clocks are produced in batches. Information concerning these two products follows:

Additionally, the following overhead costs are reported for the activities associated with the two products:


1. Classify activities as unit-level, batch-level, product-level, and facility-level.

2. Reduce the rates by grouping all activities with identical consumption ratios into homogeneous cost pools. Select an activity driver for each cost pool, and compute a pool rate.

3. Using the pool rates calculated in Requirement 2, assign all overhead costs to the two products, and compute the overhead cost per unit for each.

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