The Bridgewater Company Recently Switched to Activity Based Costing ABC

Essay

The Bridgewater Company recently switched to activity based costing ABC. The prior method allocated overhead costs at the rate of $200 per machine hour. The manager of Department J has estimated the following cost drivers and rates:
During May, Bridgewater purchased and used $400,000 of direct materials at $40 per ton. There were 32 production runs using a total of 48,000 machine hours in May. The manager of Department J needed 48 inspections
Required:
(a) Calculate the total overhead costs that would have been allocated to production using the prior method
(b) Calculate the total overhead costs that would be allocated using Activity-Based Costing
(c) Why is activity-based information useful for making business decisions?