The Good Sounds Corp. is attempting to get a better estimate of the cost of their products.
As a first step, they are attempting to allocate overhead by defining three activity cost pools and three corresponding cost drivers. They believe that the cost drivers of each of these pools correlate with the costs of that activity pool.
The estimated overhead costs and activity levels for each activity are given as follows:
Activity Cost Driver Estimated OH costs Estimated Activity level
Supervision Direct Labor $ $60,000 $150,000
Inspection # Inspections $40,000 2,000
Machine use Machine hours $400,000 10,000
Activity data for the two products manufactured by the company are as follows:
Radios CD Players
Direct labor $ $120,000 $30,000
# Inspections 500 1,500
Machine hours 5,000 5,000
What amount of overhead will be applied to Radios for the supervision activity?