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Commonwealth Devices makes three wearable fitness devices at its Lake Plant: CFit$-1,$ CFit$-2,$ and CFit$-$Xtra. The company has for many years allocated overhead to products using machine$-$hours. Last year, the Lake Plant produced and shipped $8,300$ units of CFit$-1,14,900$ units of CFit$-2,$ and $8,300$ units of CFit$-$Xtra. The plant recorded the following revenues and costs:

COMMONWEALTH DEVICES

Lake Plant

Income Statement

CFit$-1$ CFit$-2$ CFit$-$Xtra Total

Sales revenue $ $913,000$ $ $1,490,000$ $ $1,245,000$ $ $3,648,000$

Direct costs

Direct materials $222,000310,000270,000802,000$

Direct labor $70,00082,500150,000302,500$

Variable overhead

Machine setup $222,000$

Order processing $174,000$

Materials handling $222,000$

Machining $126,000$

Shipping $117,000$

Contribution margin $ $1,682,500$

Plant administration costs $1,430,000$

Gross profit $ $252,500$

The Lake Plant has put together an employee team to recommend a possible activity$-$based cost system, including cost allocation bases. The employee team recommends the following:

Activity Cost Driver CFit$-1$ CFit$-2$ CFit$-$Xtra

Machine setup Setups $80160160$

Order processing Orders received $92011$

Materials handling Material movements $3,0004,5005,000$

Machining Machine$-$hours $10,00016,00024,000$

Shipping Units shipped $8,00014,0008,000$

The employee team further recommends that administration costs not be allocated to products.

Required:

a$.$ Using machine$-$hours to allocate overhead, complete the income statement for the Lake Plant. Do not allocate administrative costs to products.

b$-1.$ Compute the cost driver rates.

b$-2.$ Complete the income statement using the activity$-$based costing method suggested by the employee team.

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