10. Goodrich Tires manufactures tires for dune buggies and has two different products, nubby tires and smooth tires. The company produces 5,000 nubby tires and 10,000 smooth tires each year and incurs $167,000 of overhead costs. The following information is available:

Activity Total Cost Cost Driver

Materials handling $60,000 Number of requisitions

Machine setups 50,000 Number of setups

Quality inspections 57,000 Number of inspections

For the nubby tires, the company has 400 requisitions, 200 setups, and 200 inspections. The smooth tires require 600 requisitions, 300 setups, and 400 inspections.

Instructions

Determine the overhead rate for each activity.

11. Caterpiller Manufacturing has five activity cost pools and two products (a budget lawnmower and a deluxe lawnmower). Information is presented below:

Cost Drivers by Product

Activity Cost Pool Cost Driver Est. Overhead Budget Deluxe

Ordering and Receiving Orders $ 120,000 600 400

Machine Setup Setups 297,000 500 400

Machining Machine hours 1,000,000 150,000 100,000

Assembly Parts 1,400,000 1,200,000 800,000

Inspection Inspections 300,000 550 450

Instructions

Compute the overhead cost per unit for each product. Production is 700,000 units of Budget and 200,000 units of Deluxe. Round your answer to the nearest cent.

Activity Cost Pool

Cost Driver

Est. Overhead

Cost Drivers by Product

Budget Deluxe

Overhead Rate

Ordering and Receiving

Orders

$120,000

600

400

$120/order

Machine Setup

Setups

297,000

500

400

$330/setup

Machining

Machine hours

1,000,000

150,000

100,000

$4/machine hour

Assembly

Parts

1,400,000

1,200,000

800,000

$0.70/part

Inspection

Inspections

300,000

550

450

$300/inspection