Ramos Company has identivied the following overhead activities, costs, and activ

Question

Ramos Company has identivied the following overhead activities, costs, and activity drivers for the coming year:

Activity Expected Cost Activity Driver Activity Capacity
Equip Set-up 120,000 No. of Set-ups 300
Ordering Costs 90,000 No. of Orders 9,000
Machine Costs 210,000 Machine Hours 21,000
Receiving 100,000 Receiving Hours 5,000
Total Overhead 520,000
The Company's normal activity is 4,000 direct labor hours.

Activity A: Activity B:
3,000 direct labor hours 1,000 direct labor hours
200 setups 100 setups
3,000 orders 6,000 orders
12,000 machine hours 9,000 machine hours
1,500 receiving hours 3,500 receiving hours

Required:
1. Compute the predetermined overhead rate for the company as a whole based on direct labor hours.
2. Compute the activity rates for each activity.
3. Compute the overhead cost applied to each model using the four activity drivers.

Explanation / Answer

activity A: overhead cost: $1600 activity B: verhead cost: $1150

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