Question
Brian Lee has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is
Brian Lee has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $977,310 is based on 32,577 machine hours. In an initial analysis of overhead costs, Brian has identified the following activity cost pools. Cost Pool Product assembly 44,000 machine hours Expected Cost Expected Activities $ 484,000 Machine setup and calibration 372,600 5,400 setups Product inspection 70,560 1,440 batches Raw materials storage 50,150 295,000 pounds $ 977,310 (a) Calculate the company's traditional overhead rate based on machine hours. Overhead rate $ /MH (b) Calculate the company's overhead rates using the proposed activity-based costing pools. (Round answers to 2 decimal places, e.g. 15.25.) Product assembly $ /MH $ /setup Machine setup and calibration $ /batch Product inspection $ /lb Raw materials storage
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