Question

Maverick Mfg has been struggling financially. They currently utilize a plantwide overhead rate based on direct-labor hours (DLH). Using the information below. calculate the requested amounts. Maverick currently has two product lines, A Product and B Product 6,000 units of the A Product and 5,000 units of B Product are manufactured each month. All products in the A Product line have the same activity requirements, that is no one product within the line requires more machine-hours, setups, or direct-labor hours than the other products in the line. Total manufacturing overhead is $1,235,000 and is broken out by activity measure below. Estimated Expected Activity Measure Overhead Cost Activity Machining Machine-hours $630,000 7,000 MHS #setups $160,000 80 setups Machine setups Product design General factory products $125,000 5 products Direct labor- hours $320,000 2,000 DLHS.......... Activity Measure Machine-hours 2,000 #setups # of products Direct labor-hours .-.-.-.-.-.1,800 ........... 200 Utilizing Activity Based Costing, the following overhead rates would be utilized Machine-hours: per MH Number of set up: per setup

Answer 1

Activity rate for machine hour = Estimated overhead/Estimated machine hours

= 630,000/7,000

= $90 per machine hour

Activity rate for Number of setup = Estimated overhead/Estimated setup

= 160,000/80

= $2,000 per setup

Activity rate for Number of products = Estimated overhead/Estimated products

= 125,000/5

= $25,000 per product

Activity rate for Direct labor hours = Estimated overhead/Estimated direct labor hours

= 320,000/2,000

= $160 per direct labor hours

Activity rate for machine hour	$90 per machine hour
Activity rate for Number of setup	$2,000 per setup
Activity rate for Number of products	$25,000 per product
Activity rate for Direct labor hours	$160 per direct labor hours

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