Air United, Inc. manufactures two products: missile range instruments and space

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
$
$

Explanation / Answer

Calculate overhead rate :

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

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

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