Spin Cycle Company uses three activity pools to apply overhead to its products.

Question

Spin Cycle Company uses three activity pools to apply overhead to its products. Each activity has a cost driver used to allocate the overhead costs to the product. The activities and related overhead costs are as follows: product design $44,000; machining $330,000; and material handling $110,000. The cost drivers and expected use are as follows. Expected Use of Cost Drivers per Activity Cost Drivers Product design Machining Material handlingNumber of set-ups Activities Number of product changes Machine hours 10 153,000 94 Calculate the predetermined overhead rate for each activity. (Round answers to 2 decimal places, e.g. 15.25.) Activit Overhead Rate Product design Machining Material handling per product change per machine hr per set-up Classify each of these activities as unit-level, batch-level, product-level, or facility-level Product design Machining Material handling

Explanation / Answer

A). Predetermined rate computation for each activity:

1.Predetermined rate for Product Design =$44000/10 = $4400 per product change

2. Predetermined rate for machining = $330000/153000 = $2.16 per machine hour

3.Predetermined rate for machine handling = $110000/94 = $ 1170 per set up.

B)The Production Design is of Product Level

The Machining is of Unit Level

The material handlin is of Batch level

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