Zachary Industries produces two electronic decoders, P and Q. Decoder P is more

Question

Zachary Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows Cost Pool Activity Pools Repair and maintenance on assembly machine 102,000Number of units produced Programming cost Software inspections Product testing Total overhead cost Total Cost Driver 90,280 Number of programming hours 10,500 Number of inspections 9,800 Number of tests $212,580 Expected activity for each product follows Number of Number of Programming Decoder P Decoder Q Total Units 17,000 34,000 51,000 Hours 2,000 1,700 3,700 Number of Inspections 193 157 350 Number of Tests 1,200 1,600 2,800 Required a. Compute the overhead rate for each activity pool b. Determine the overhead cost allocated to each product.

Explanation / Answer

Calculate overhead rate :

Calculate total overhead cost allocated :

Activity pool Overhead rate Repairs and maintenance of assembly machine (102000/51000) 2 per unit Programming cost (90280/3700) 24.4 per hour Software inspection (10500/350) 30 per inspection Product testing (9800/2800) 3.5 per test

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