Question

Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 52 range instruments and 303 pressure gauges were produced, and overhead costs of $83,130 were estimated. An analysis of estimated overhead costs reveals the following activities.

Activities
Cost Drivers
Total Cost
1. Materials handling Number of requisitions
$33,495
2. Machine setups Number of setups
26,235
3. Quality inspections Number of inspections
23,400
$83,130

The cost driver volume for each product was as follows.

Cost Drivers
Instruments
Gauges
Total
Number of requisitions 380 635 1,015
Number of setups 180 315 495
Number of inspections 265 255 520

Determine the overhead rate for each activity.

Overhead Rate
Materials handling
$
Machine setups
$
Quality inspections
$

Assign the manufacturing overhead costs for April to the two products using activity-based costing. (Round per unit answers to 2 decimal places, e.g. 12.25.)

Instruments
Gauges
Total cost assigned
$
$
Overhead cost per Unit
$
$

Answer 1

Calculate overhead rate :

Cost pool	Estimated overhead		Overhead rate
Material handling	33495	1015 no of requisition	33 per requisition
Machine setups	26235	495 no of setups	53 per setup
Quality inspection	23400	520 no of inspection	45 per inspection

Assign the manufacturing overhead costs for April to the two products using activity-based costing

	Instruments	Gauges
Material handling	12540	20955
Machine setup	9540	16695
Quality inspection	11925	11475
Total cost assigned	34005	49125
No of units	52	303
Overhead cost per unit	653.94	162.13