Terry Industries produces two electronic decoders, P and Q. Decoder P is more so

Question

Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decodr Q. Because of these product differences, the company decoders, P and Q. Decoder P is mor wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Cost Pool Total Cost Driver Activity Pools Repair and maintenance on assembly machine Programming cost Software inspections Number of units produced Number of programming hours Number of inspections Number of tests $ 75,600 84,600 5,940 7,020 Product testing Total overhead cost $173,160 Expected activity for each product follows. Number of Number Programming Number Number of Tests 1,200 1,500 of Units 15,000 39,000 Hoursof Inspections 1,900 1,700 Decoder P Decoder Q 195 75 Total 54,000 3,600 270 2,700 Required: a. Compute the overhead rate for each activity pool. (Round your answers to 2 decimal places.) Allocation Rate Decoder P Decoder Q Activity Pools Repair and maintenance on assembly machine Programming cost Software inspections Product testing

Explanation / Answer

Repair and maintenance on assembly machine =75600/54000=1.4 per assembly machine

Programming cost =84600/3600 = 23.5 per programming cost

Software inspection =5940/270 = 22 per inspection

Product testing =7020/2700 = 2.6 per test

Allocation rate

Activity pools

Decoder P

Decoder Q

Repair and maintenance on assembly machine

1.4

1.4

Programming cost

23.5

23.5

Software inspection

22

22

Product testing

2.6

2.6

                                                                                                Decoder P       Decoder Q

Repair and maintenance on assembly machine      21000                 54600

Programming cost                                                         44650                  39950

Software inspection                                                       4290                          1650

Product testing                                                                3120                    3900

Total allocated cost

Decoder P

73060

Decoder Q

100100

Allocation rate

Activity pools

Decoder P

Decoder Q

Repair and maintenance on assembly machine

1.4

1.4

Programming cost

23.5

23.5

Software inspection

22

22

Product testing

2.6

2.6

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