Question

Neylon Company produces mathematical and financial calculators and operates at capacity. Data relat i Data Table (Click the icon to view the data.) Mathematical Financial Total manufacturing overhead costs are: Total Machining costs $ 450,000 Setup costs 120,000 Inspection costs 100,000 Annual production in units Direct materials cost Direct manufacturing labor cost Direct manufacturing labor-hours 100,000 300,000 $ 100,000 $ 5,000 25,000 200,000 600,000 200,000 10,000 50,000 100 300 Begin by choosing a cost driver for each overhead cost pool. Machine-hours Cost driver Number of production runs 100 Inspection hours 700 Activity Machining Set up Inspection Machine-hours Production runs Inspection-hours Rate $ 6 per machine-hour $ 600 per production run $ 100 per inspection-hour Print Done Determine the formula to calculate the overhead allocated to each product. Indirect-cost rate X Product quantity of allocation base = Overhead allocated to product Now calculate the total overhead allocated to each product and the overhead cost per unit. (Round your answer to the nearest cent.) Mathematical Machining costs Setup costs Inspection costs Total overhead costs Manufacturing overhead cost per unit Choose from any list or enter any number in the input fields and then click Check Answer.

Answer 1

Ans. 1	Activity	Activity cost (a)	Total activity (b)	Activity Rate (a/b)
	Machining costs	$450,000	75000	$6.00	per machine hour
	Setup	$120,000	200	$600.00	per production run
	Inspection	$100,000	1000	$100.00	per inspection hour
	*Calculation of total activity :
	Activity	Cost driver	Mathematical (a)	Financial (b)	Total activity (a+b)
	Machining costs	Machine hours	25000	50000	75000
	Setup	Production runs	100	100	200
	Inspection	Inspection hours	700	300	1000
Ans. 2	*Overhead allocated to each product =   Activity rate * Activity driver incurred
	Activity	Mathematical
	Machining costs ($6 * 25,000)	$150,000
	Setup ($600 * 100)	$60,000
	Inspection ($100 * 700)	$70,000
	Total Overhead Cost (a)	$280,000
	Annual production in units (b)	100000
	Manufacturing overhead cost per unit (a/b)	$2.80
	Activity	Financial
	Machining costs ($6 * 50,000)	$300,000
	Setup ($600 * 100)	$60,000
	Inspection ($100 * 300)	$30,000
	Total Overhead Cost (a)	$390,000
	Annual production in units (b)	200000
	Manufacturing overhead cost per unit (a/b)	$1.95