Ramos Company has identivied the following overhead activities, costs, and activity drivers for the coming year:
Activity Expected Cost Activity Driver Activity Capacity
- Equip Set-up 120,000 No. of Set-ups 300
- Ordering Costs 90,000 No. of Orders 9,000
- Machine Costs 210,000 Machine Hours 21,000
- Receiving 100,000 Receiving Hours 5,000
- Total Overhead 520,000
The Company's normal activity is 4,000 direct labor hours.
Activity A: Activity B:
- 3,000 direct labor hours 1,000 direct labor hours
- 200 setups 100 setups
- 3,000 orders 6,000 orders
- 12,000 machine hours 9,000 machine hours
- 1,500 receiving hours 3,500 receiving hours
Required:
1. Compute the predetermined overhead rate for the company as a whole based on direct labor hours.
2. Compute the activity rates for each activity.
3. Compute the overhead cost applied to each model using the four activity drivers.