Fontillas 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.

The cost driver volume for each product was as follows.

Instructions

1. Determine the overhead rate for each activity.

2. Assign the manufacturing overhead costs for April to the two products using activity-based costing.

3. Write a memorandum to the president of Fontillas Instrument explaining the benefits of activity-based costing.

Transcribed Image Text:

Activities 1. Materials handling 2. Machine setups 3. Quality inspections Cost Drivers Number of requisitions Total Cost S35,000 27,500 Number of setups Number of inspections 27,000 Cost Drivers Number of requisitions Number of setups Number of inspections 400 200 os200 Instruments Gauges Total 600 ,000 300 500 400 600