Exercise 18-9 (Part Level Submission) Air United, Inc. manufactures two products

Question

Exercise 18-9 (Part Level Submission) Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 51 range instruments and 305 pressure gauges were produced, and overhead costs of $85,890 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities Cost Drivers Total Cost 1. Materials handling 2. Machine setups 3. Quality inspections Number of requisitions Number of setups Number of inspections $37,620 26,950 21,320 $85,890 The cost driver volume for each product was as follows. Cost Drivers Gauges I Instruments Total Number of requisitions Number of setups Number of inspections 385 175 275 660 1,045 315 245 490 520 Determine the overhead rate for each activity Overhead Rate Materials handling Machine setups Quality inspections

Explanation / Answer

Activities Cost Driver Activity Pool Cost Pool Overhead Rate Materials handling Number of Requisition 1045 37620 36 Machine setups Number of Setup 490 26950 55 Quality inspections Number of Inspections 520 21320 41

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