Alpha Beta Inc. makes coffee table books. The four areas involved in production (and their estimated costs for the next year) are: sheet cutting ($55,000), printing ($118,250), binding ($12,750) and covers ($45,000). Costs for sheet cutting and printing are related to page number. The costs of binding and covers increase with the machine hours used. Next year, the company will make 10,000 paperbacks; these will average 200 pages and each will require 1/10 machine hours to make. 1,000 hardcover books will be published averaging 310 pages each and 1/4 machine hours each.
Based on this information, Alpha Beta estimates that it can use one or two overhead rates. If they use one rate, they can use either page number or machine hours. If they use page number, the rate per page will be $______ per page; the amount per paperback will be $_____ and per hardcover will be $_____. If they use machine hours, the rate per hour will be $ _____ per hour; the amount per paperback will be $ and per hardcover will be $_____.
Alpha Beta may decide to use two overhead rates instead of one: a per page rate of $ _____ and a charge for binding and covers of $ _____-per machine hour. If two rates are used, the estimated overhead charged to each paperback will be $_____, and for hardcovers it will be $_____. You can round to two decimals!