Exercise 21-16 Exercise 21-16 Major Instrument, Inc. manufactures two products:

Question

Exercise 21-16

Exercise 21-16

Major Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 64 range instruments and 384 pressure gauges were produced, and overhead costs of $87,210 were estimated. An analysis of estimated overhead costs reveals the following activities.
Activities Cost Drivers Total Cost 1. Materials handling Number of requisitions $40,590 2. Machine setups Number of setups 24,080 3. Quality inspections Number of inspections 22,540 $87,210
The cost driver volume for each product was as follows.
Cost Drivers Instruments Gauges Total Number of requisitions 400 590 990 Number of setups 180 250 430 Number of inspections 180 310 490 Determine the overhead rate for each activity. (Round answers to 0 decimal places, e.g. 5,275.)
Activity Cost Pools Activity-Based
Overhead Rates Materials handling $ ? Machine setups $ ? Quality inspections $ ? Assign the manufacturing overhead costs for April to the two products using activity based costing. (Round answers to 0 decimal places, e.g. 5,275.)
Products Total costs assigned Instruments $ ? Gauges $ ?

Explanation / Answer

DETERMINATION OF OVERHEAD RATE FOR EACH ACTIVITY-

MANUFACTURING OVERHEAD COST FOR APRIL TO THE TWO PRODUCT

ACTIVITIES COST DRIVERS TOTAL COST ($) ACTIVITY BASED OVERHEAD RATES ($) (Total Cost / Cost Drivers) Materials handling Number of requisitions = 990 40,590 41.00 PER REQUISITION Machine setups Number of setups = 430 24,080 56.00 PER SET UP Quality inspections Number of inspections = 490 22,540 46.00 PER INSPECTION

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