Air United, Inc. manufactures two products: missile range instruments and space
ID: 2718552 • Letter: A
Question
Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 55 range instruments and 304 pressure gauges were produced, and overhead costs of $86,530 were estimated. An analysis of estimated overhead costs reveals the following activities.
Activities Cost Drivers Total Cost
1. Materials handling Number of requisitions $39,780
2. Machine setups Number of setups 25,750
3. Quality inspections Number of inspections 21,000
$86,530
The cost driver volume for each product was as follows.
Cost Drivers
Instruments
Gauges
Total
Determine the overhead rate for each activity.
Overhead Rate
Assign the manufacturing overhead costs for April to the two products using activity-based costing. (Round per unit answers to 2 decimal places, e.g. 12.25.)
Instruments
Gauges
Cost Drivers
Instruments
Gauges
Total
Number of requisitions 385 635 1,020 Number of setups 210 305 515 Number of inspections 240 260 500Explanation / Answer
Activities Cost Drivers Cost No of drivers O/H Rate per driver No of Activities of Instruments Cost of Instruments No of Activities of Instruments Cost of Instruments Material Handling No of requisitions 39,780.00 1,020.00 39.00 385.00 15,015.00 635.00 24,765.00 Machine Set ups No of setups 25,750.00 515.00 50.00 210.00 10,500.00 305.00 15,250.00 Quality Inspections No of inspections 21,000.00 500.00 42.00 240.00 10,080.00 260.00 10,920.00 86,530.00 35,595.00 50,935.00 Particulars Instruments Gauges Total costs Assigned 35,595.00 50,935.00 No of Units 55.00 304.00 Overhead cost per Unit 647.18 167.55
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