Question

Cenatrac produces two products: hand soap and sanitizer. During June, 8,000 containers of hand soap and...

Cenatrac produces two products: hand soap and sanitizer. During June, 8,000 containers of hand soap and 6,000 containers of sanitizer were produced. Total overhead costs of $34,000 were incurred. The following information related to overhead costs was available:

Activity Cost Driver Total Cost

Materials handling Number of requisitions $7,000

Machine setups Number of setups 12,000

Quality inspections Number of inspections 15,000

The cost driver volume for each product was as follows:

Cost Driver Hand soap Sanitizer Total

Number of requisitions 25 15 40

Number of setups 12 13 25

Number of inspections 90 160 250

Instructions (a) Compute the overhead rate for each activity.

(b) Assign the manufacturing overhead costs for June to the two products using activity-based costing, and determine the overhead cost per unit

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Answer #1
a
Activity Total Cost Total activity Activity rate
Materials handling 7000 40 175
Machine setups 12000 25 480
Quality inspections 15000 250 60
b
Hand soap Sanitizer
Activity Activity Activity rate Overhead assigned Activity Activity rate Overhead assigned
Materials handling 25 175 4375 15 175 2625
Machine setups 12 480 5760 13 480 6240
Quality inspections 90 60 5400 160 60 9600
Total overhead assigned 15535 18465
Divided by units 8000 6000
Overhead cost per unit 1.94 3.08
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