Question

Rundle Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows:

Activity Pools	Cost Pool Total			Cost Driver
Repair and maintenance on assembly machine	$	110,200		Number of units produced
Programming cost		95,600		Number of programming hours
Software inspections		9,240		Number of inspections
Product testing		7,000		Number of tests
Total overhead cost	$	222,040

Expected activity for each product follows:

	Number of Units			Number of Programming Hours			Number of Inspections			Number of Tests
Decoder P		17,000			2,200			189			1,400
Decoder Q		41,000			1,800			141			1,400
Total		58,000			4,000			330			2,800

Required

1. Compute the overhead rate for each activity pool.

2. Determine the overhead cost allocated to each product.

Determine the overhead cost allocated to each product. (Round intermediate calculations to 2 decimal places.)

	Total Allocated Cost Decoder P Decoder Q

Answer 1

Calculation of activity rates for each activity. Activity Rate Activity Cont Pools Repair and Maintenance on assembly machine Programming Cost Software Inspection Product Testing 1.00 per units 23.00 per Progr. hour 28,00 per Inspections 2.50 per tests Computation of Overhead Rate for Each Activity Pool Amounts in 5 Working Note Custrie Cast Paris Tutal Activity Base Activity Rate s Activity Pools Repair and Maintenance on Sembly machine Programming Cast Software Inspection Product Testing Total overhead cost Number of Unit Produced Number of Programming Hours Number of Tnspections Number of Tests S 1.10.200 95.600 9220 7.000 221200 580ools 1.90 per units 4000123.90 per Progr. hour 330120,00 per Inspections 2005 2.50 per tests

Computation of Overhead cost allocated to each type of Product Particulars Per unit Total = 55.51 per S 93,672.00 Answer- Decoder P Decoder =$3.13 per $ 1.28,368.00 Working Note- Allocation of Overhead cost to each Product Activity Speedboat Biss boat (17000 1.90) 77,900 Repair anf Maintenance on assembly machine Programming Cost 32.300 (41000*1.90) 52,580 (1800*23.90) 5,292 (141*28) (189-28) 3,948 Software Inspection Product Testing Total overhead cost = (1400*2.50) 3,500 (1400*2.50) 93.672 3.500 1.28.368 Total Allocation Overhead Cost Decoder P Decoder 0 Total cost 93,672 1.28 168 ZRZ22040 The activity-based factory overhead per unit for each product areas. Per Unit Overhead=Total Allocated Overhead / No. of units For Décoder P, Per Unit Overhead = 593,672 / 17000 = $5.51. per unit For Decoder Q. Per Unit Overhead=5128,368/41000 =$3.13 per unit