Koehler (see Exercise E19-15 and Exercise E19-16) makes handheld calculators in two models—basic and professional—and wants to further refine its costing system by allocating overhead using activity-based costing. The estimated $721,000 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled:

Requirement 1 

Koehler expects to produce 200,000 basic models and 200,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? 

Requirement 2 

Compare your answers for Exercise E19-15, Exercise E19-16, and Exercise E19-17. What conclusions can you draw?

Data from Exercise E19-15

Koehler makes handheld calculators in two models: basic and professional. Koehler estimated $721,000 of manufacturing overhead and 515,000 machine hours for the year. The basic model actually consumed 230,000 machine hours, and the professional model consumed 285,000 machine hours. Compute the predetermined overhead allocation rate using machine hours (MHr) as the allocation base. How much overhead is allocated to the basic model? To the professional model?

Transcribed Image Text:

Overhead costs Allocation base Expected usage: Basic Model Professional Model Materials Handling $ 45,000 Number of parts 32 parts per calculator 58 parts per calculator Machine Setup $ 136,000 Number of setups 24 setups per year 44 setups per year Insertion of Parts $ 540,000 Number of parts 32 parts per calculator 58 parts per calculator Total $ 721,000