Question

The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.

Activity Cost Pool	Budgeted Overhead Cost			Cost Driver		Budgeted Level for Cost Driver		Pool Rate
Machine setups	$	300,000		Number of setups		100			$	3,000	per setup
Material handling		90,000		Weight of raw material		30,000	lb.		$	3	per pound
Hazardous waste control		30,000		Weight of hazardous chemicals used		6,000	lb.		$	5	per pound
Quality control		150,000		Number of inspections		2,000			$	75	per inspection
Other overhead costs		200,000		Machine hours		20,000			$	10	per machine hour
Total	$	770,000

An order for 1,000 boxes of medical-testing agent has the following production requirements.

Machine setups	7	setups
Raw material	12,000	pounds
Hazardous materials	5,000	pounds
Inspections	10	inspections
Machine hours	800	machine hours

Required:
1. Compute the total overhead that should be assigned to the medical-testing agent order.
2. What is the overhead cost per box of testing agent?
3. Suppose Tulsa Medical Supply Company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement 3, how much overhead would be assigned to the medical-testing agent order?
a. In total.
b. Per box of testing agent.

Compute the total overhead that should be assigned to the medical-testing agent order. What is the overhead cost per box of testing agent? (Round "Overhead cost" to 2 decimal places.)

	Total overhead $ Overhead cost $ per box

Suppose Tulsa Medical Supply Company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour. (Round your answer to 2 decimal places.)

	Overhead rate per machine hr.

Under the approach in requirement 3, how much overhead would be assigned to the medical-testing agent order?

a. In total.

b. Per box of testing agent. (Round your answer to 2 decimal places.)

	a. Total overhead b. Overhead cost per box

Answer 1

Solution-

1 Total overhead that should be assigned to the medical testing agent order Budgeted Budgeted Level Reqirements for Medical Overhead assigned to the medical-testing Activity Cost Pool Cost Driver Pool Rate (a) Overhead Cost for Cost Driver testing agent (b) agent order (a*b) Machine setups $ 300,000 Number of setups 100 $3,000 per setup 7 setups $ 21,000 Material handling $ 90,000 Weight of raw material 30,000 $ 3 per pound 12,000 pounds $ 36,000 Hazardous waste control $ 30,000 Weight of hazardous chemicals 6,000 $ 5 per pound 5,000 pounds $ 25,000 Quality control $ 150,000 Number of inspections 2,000 $ 75 per inspection 10 inspections $ 750 Other overhead costs $ 200,000 Machine hours 20,000 $ 10 per machine hour 800 machine hours $ 8,000 Total $ $ 770,000 $ 90,750 Total overhead $ 90,750 2 Overhead cost per box of testing agent Total overhead (a) a $ Boxes of medical-testing agent (b) Overhead cost (a/b) $ 90.750 1000 90.75 per box Overhead cost $ 90.75 per box 3 Rate per hour using single predetermined overhead rate based on machine hours. Compute the Total Overheads (a) $ 770,000.00 Machine Hours (b) 20000 Overhead rate (a/b) $ $ 38.50 per machine hr. Overhead rate $ 38.50 per machine hr.

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4 Overhead assigned to the medical-testing agent order under the approach in requirement 3 a. In total. b. Per box of testing agent. $ Overhead rate per machine hour (a) Machine Hours (b) Total overhead (c=a*b) Boxes of medical testing agent (d) Overhead cost (c/d) $ 38.50 800 30,800 1000 30.80 per box $ S a. Total overhead b. Overhead cost 30,800.00 30.80 per box $