Rapid City Radiology, Inc. manufactures chemicals used in radiological imaging systems. The controller has established the following activity cost pools and cost drivers.

An order for 1,000 boxes of radiological development chemicals has the following production requirements.

Required:
1. Compute the total overhead that should be assigned to the development-chemical order.
2. What is the overhead cost per box of chemicals'?
3. Suppose Rapid City Radiology, Inc. were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement (3), how much overhead would be assigned to the development-chemical order?

a. In total.

b. Per box of chemicals.
5. Explain why these two product-costing systems result in such widely differing costs. Which system do you recommend? Why?

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Budgeted Overhead Machine setups Activity Cost Pool $1,000,000 Cost Cost Driver Budgeted Level for Cost Driver Number of setups 250 Pool Rate $4,000 per setup Material handling 300,000 Weight of raw material 75,000 lb. $4 per pound Hazardous waste control Weight of hazardous 100.000 chemicals used 10.000 lb. $10 per pound Quality control 300,000 Number of inspections 2,000 $150 per inspection Other overhead costs 800,000 Machine hours 40,000 $20 per machine hour Total $2,500,000