Question
Benson Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because
Benson Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows:
Activity PoolsCost Pool TotalCost DriverRepair and maintenance on assembly machine$68,400 Number of units producedProgramming cost 96,760 Number of programming hoursSoftware inspections 7,820 Number of inspectionsProduct testing 8,160 Number of testsTotal overhead cost$181,140Expected activity for each product follows:
Number of UnitsNumber of Programming HoursNumber of InspectionsNumber of TestsDecoder P 15,000 1,800 199 1,500 Decoder Q 42,000 2,300 141 1,900 Total 57,000 4,100 340 3,400Required
Compute the overhead rate for each activity pool.
Determine the overhead cost allocated to each product.
Activity PoolsAllocation RateRepair and maintenance on assembly machine Programming cost Software inspections Product testing
Determine the overhead cost allocated to each product. (Round intermediate calculations to 2 decimal places.)
Total Allocated CostDecoder P DecoderStep by Step Solution
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