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Chapter 4 #3 E-M:4-17. Computing and using activity-based costing overhead allocation rates (Learning Objectives 2, 3) Koehler (see Exercise E-M:4-15 and Exercise E-M:4-16) makes
Chapter 4 #3 E-M:4-17. Computing and using activity-based costing overhead allocation rates (Learning Objectives 2, 3) Koehler (see Exercise E-M:4-15 and Exercise E-M:4-16) makes handheld calculators in two models-basic and professional--and wants to further refine its costing system by allocating overhead using activity-based costing. The estimated $721,000 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled: Overhead costs Allocation base Expected usage: Basic Model Professional Model Materials Handling Machine Setup $136,000 Number of setups $ 45,000 Number of parts 32 parts per calculator 58 parts per calculator 24 setups per year 44 setups per year. Insertion of Parts $540,000 Number of parts 32 parts per calculator 58 parts per calculator Total $ 721,000 Requirement 1 Koehler expects to produce 200,000 basic models and 200,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? Round the materials handling allocation rate to four decimal places and the remaining allocation rates to the nearest cent.
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