Problem:
Sorce Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $89,500 were estimated. An analysis of estimated overhead costs reveals the following activities.
|
Activities
|
Cost Drivers
|
($) Total Cost
|
|
1. Materials Handing
|
Number of requisition
|
35,000
|
|
2. Machine setups
|
Number of setups
|
27,500
|
|
3. Quality inspections
|
Number of inspections
|
27,000
|
|
|
$89,500
|
The cost driver volume for each product was as follows:
|
Cost Drivers Instruments
|
Gauges
|
Total
|
|
Number of requisition
|
400
|
600
|
1,000
|
|
Number of setups
|
200
|
300
|
500
|
|
Number of inspections
|
200
|
400
|
600
|
Instructions:
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for April to the two products using activity based costing.