Montreal Inc.'s chief financial officer is not satisfied with the traditional method of allocating manufacturing overhead. He believes that most of the manufacturing overhead costs relate to the V-120 product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs:
Activity Cost Pools ...............Expected Use of Cost Drivers .......Estimated Overhead Costs
Setting up machines ......................................1,500 set-ups............................. $ 300,000
Assembling ........................................50,000 labour hours............................ 1,500,000
Inspection .................................................60 inspections ..............................300,000
(a) Calculate the predetermined overhead rate for each activity.
(b) Classify each of these activities as unit-level, batch-level, product-level, or facility-level.