Major Instrument, Inc. manufactures two products: missile range
accounting teacher (Not rated)
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E4-11 Major Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $89,500 were estimated. An analysis of estimated overhead costs reveals the following activities.
Activity | Cost Driver | Total Cost | |||
1 | Material handling | Number of requisitions | $40,000 | ||
2 | Machine setups | Number of setups | $27,500 | ||
3 | Quality inspections | Number of inspections | $27,000 | ||
$94,500 |
The cost driver volume for each product was as follows.
Cost Driver | Instruments | Gauges | Total |
Number of requisitions | 400 | 600 | 1,000 |
Number of setups | 200 | 300 | 500 |
Number of inspections | 200 | 400 | 600 |
Instructions
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for April to the two products using activity-based costing.
(c) Write a memorandum to the president of Major Instrument explaining the benefits of activity-based costing. (Enter your answer in the block below.)
10 years ago
Major Instrument, Inc. manufactures two products: missile range
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e4-11_major_instrument.xls
