Question

Compute the predetermined overhead allocation rate for each activity 2 Points Volty, Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2018 and their allocation bases are as follows: Activity Materials handling Machine setup Insertion of parts Finishing Total Total Budgeted Cost $15,000 6,000 60,000 90,000 $171,000 Allocation Base Number of parts Number of setups Number of parts Finishing direct labor hours Volty expects to produce 800 chrome bumpers during the year. The bumpers are expected to use 6,000 parts, require 15 setups, and consume 1,200 hours of finishing time.

Answer 1

Activity rate

Overhead	Estimated cost	Estimated activity	Activity rate
Material handling	15000	6000 parts	2.5 per parts
Machine setup	6000	15 Setup	400 per setup
Insertion of parts	60000	6000 Parts	10 per parts
Finishing	90000	1200 Hour	75 per hour