Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2018 and their allocation bases are as follows:

 

 

COMPLETE ONLY REQUIREMENT 2

Requirement 1. Compute the predetermined overhead allocation rate for each activity.

Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. (Round your answers to the nearest cent.)

						Predetermined OH
	Estimated overhead costs	/	Estimated qty of the allocation base		=	allocation rate

Materials handling

$12,000

/

4,000

=

$3.00

Machine setup

$3,100

/

10

=

$310.00

Insertion of parts

$42,000

/

4,000

=

$10.50

Finishing

$86,000

/

1,000

=

$86.00

Requirement 2. Compute the expected indirect manufacturing cost of each bumper.

Begin by selecting the formula to allocate overhead (OH) costs.

Predetermined OH allocation rate

x

Expected qty of the allocation base used

=

Allocated mfg. overhead costs

Now compute the expected indirect manufacturing cost of each bumper. (Round the cost per bumper to the nearest cent.)

	Allocated Mfg. OH Cost
Materials handling
Machine setup
Insertion of parts
Finishing
Total mfg. OH costs
Number of bumpers	500
Mfg. OH cost per bumper	$286.20

 

Activity Total Budgeted Cost Allocation Base Materials handling 12,000 Number of parts Machine setup 3,100 Number of setups Insertion of parts 42,000 Number of parts 86,000 Finishing Finishing direct labor hours 143,100 Total Franklin expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time.