Question

Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 200 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 Number of requisitions 1. 2. 3. Materials handling Machine setups Quality inspections Number of setups Number of inspections $33,495 27,645 24,010 $85,150 The cost driver volume for each product was as follows. Cost Drivers Instruments Gauges Number of requisitions 385 630 Number of setups 185 300 Total 1,015 485 Number of inspections 260 230 490 Determine the overhead rate for each activity. Overhead Rate Materials handi per requisition Machine setups per setup Quality inspections $ per inspection

Answer 1

	Overhead rate
Materials handling	33	per requisition	=33495/1015
Materials setups	57	per setup	=27645/485
Quality inspections	49	per inspection	=24010/490
	Instruments	Gauges
Materials handling	12705	20790
Materials setups	10545	17100
Quality inspections	12740	11270
Total cost assigned	35990	49160
Divide by units	50	200
Overhead cost per unit	719.80	245.80
Workings:
	Instruments	Gauges
Materials handling	=385*33	=630*33
Materials setups	=185*57	=300*57
Quality inspections	=260*49	=230*49