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Madison Electric Pump Corporation manufactures electric pumps for commercial use. The company produces three models, designated as regular, advanced, and deluxe. The company uses a job-order cost accounting system with manufacturing overhead applied on the basis of direct-labor hours. The system has been in place with little change for 25 years. Product costs and annual sales data are as follows:

		Regular Model					Advanced Model					Deluxe Model
Annual sales (units)		23,500					1,700					12,100
Product costs:
Direct material		$	27				$	85				$	126
Direct labor			27	(1 hr. at $27)				54	(2 hr. at $27)				54	(2 hr. at $27)
Manufacturing overhead*			177	(1 hr. at $177)				354	(2 hr. at $177)				354	(2 hr. at $177)
Total product cost		$	231				$	493				$	534

*The calculation of the predetermined overhead rate is as follows:

Manufacturing-overhead budget:
Depreciation, machinery		$	3,730,000
Maintenance, machinery			330,000
Depreciation, taxes, and insurance for factory			740,000
Engineering			910,000
Purchasing, receiving and shipping			570,000
Inspection and repair of defects			925,000
Material handling			1,075,100
Miscellaneous manufacturing overhead costs			764,600
Total		$	9,044,700

Direct-labor budget:
Regular model:		23,500	hours
Advanced model:		3,400	hours
Deluxe model:		24,200	hours
Total		51,100	hours

Predetermined overhead rate:	Budgeted overhead	=	$9,044,700	= $177 per hour
	Budgeted direct-labor hours		51,100 hours

For the past 10 years, the company

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