Identifying and Using Volume-Based and Activity-Based Cost Allocation Rates Rane Company produces electronic fish finders. It makes two different fish finders: the standard model, which is produced in bulk and sells for $150, and the deluxe model, which comes in various configurations and sells for $300. Rane’s engineering and design overhead cost for 2009 is $60,000. The following information relates to production in 2009:

Required:
1. Determine the engineering and design costs to be assigned to standard and deluxe fish finders using the following allocation methods:

a. Number of units produced

b. Number of setups required

c. Number of engineering design changes needed 2. Which allocation method do you believe is most equitable?

Transcribed Image Text:

Number of different machine setups needed for a standard model production run Number of different machine setups needed for a deluxe model production run Number of standard fish finders produced Number of deluxe fish finders produced Number of engineering design changes needed on the standard model Number of engineering design changes needed on the deluxe model Average batch size per production run for standard model Average batch size per production run for deluxe model 11 22,000 8,000 6 2 400 200