Please see the attached file.
1)Which cost driver for support overhead costs would you choose? Explain.
2) Chu anticipates 2,600 machines-hours and 300 batches for next month. Using the cost driver you chose in requirement 1, what amount of support overhead cost should Chu budget?
3) Chu adds 20% to costs to determine target revenues (and hence prices). Costs other than support overhead are expected to equal $125,000 next month. Compare the target revenue numbers obtained if the cost driver is (i) machine-hours or (ii) number of batches
The solution evaluates two cost drivers and determines the best one.