Question
HiFA Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2019, manufacturing overhead cost estimates total RM2,000,000 for an annual
HiFA Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2019, manufacturing overhead cost estimates total RM2,000,000 for an annual production capacity of 20 million pages.
For 2019, HiFA Printers has decided to evaluate the use of additional cost pools. After analysing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
Cost pool | Manufacturing overhead (RM) | Activity level of cost driver |
Design changes | 600,000 | 400 design changes |
Setups | 1,000,000 | 8,000 setups |
Inspections | 400,000 | 4,000 inspections |
Total manufacturing overhead costs | 2,000,000 |
|
During 2019, two of the customers, Joetsu Design and Myoko Home, are expected to use the following printing services:
Activity | Joetsu Design | Myoko Home |
Pages Printed | 90,000 | 56,000 |
Design changes | 7 | 4 |
Setups | 10 | 10 |
Inspections | 20 | 18 |
a)Calculate the cost driver rate if overhead costs are considered one large cost pool and are assigned based on 20 million pages of production capacity. b)Using the cost driver rate determined in (a), calculate the overhead cost estimate for Joetsu Design and Myoko Home during 2019. c)Assuming cost pools for design changes, setups, and inspections are used, calculate the cost driver rates for each of the three cost pools. d)Using the cost driver rates determined in (c), calculate the total overhead cost estimate for Joetsu Design and Myoko Home during 2019.
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