Question

Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $1,500,000 for an annual production capacity For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: Cost pool Manufacturing overhead costs Design changes $100,000 Setups 1,300,000 Inspections 100.000 Total manufacturing overhead costs $1.500.000 Activity level 400 design changes 3,000 setups 10,000 inspections During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Activity Pages Design changes Setups Inspections Money Managers 90,000 13 Hospital Systems 106,000 30 What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity? $0.15 per page 0 $0.13 per page 0 $0.14 per page 0 $0.01 per page

Answer 1

Answer is “$0.15 per page”

Estimated manufacturing overhead cost = $1,500,000
Estimated production capacity = 10,000,000

Cost drive rate = Estimated manufacturing overhead cost / Estimated production capacity
Cost drive rate = $1,500,000 / 10,000,000
Cost drive rate = $0.15 per page