Question

Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 54 range instruments and 304 pressure gauges were produced, and overhead costs of $85,150 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		27,645
3.		Quality inspections		Number of inspections		24,010
						$85,150

The cost driver volume for each product was as follows.

Cost Drivers		Instruments		Gauges		Total
Number of requisitions		385		630		1,015
Number of setups		185		300		485
Number of inspections		260		230		490

Determine the overhead rate for each activity.

		Overhead Rate
Materials handling		$enter a dollar amount
Machine setups		$enter a dollar amount
Quality inspections		$enter a dollar amount

eTextbook and Media

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		$enter a dollar amount		$enter a dollar amount
Overhead cost per Unit		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places

Answer 1

Determine the overhead rate for each activity.

		Overhead Rate
Materials handling	33495/1015	33 per requisition
Machine setups	27645/485	57 per setup
Quality inspections	24010/490	49 per inspection

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		(385*33+185*57+260*49) = 35990		(630*33+300*57+230*49) = 49160
Overhead cost per Unit		35990/54 = 666.48		49160/304 = 161.71