J&R Associates, Inc. manufacturers and sells autobody parts. The Company has two main, but differently made, products engines and transmissions. The Company expects to make 1,000 engines and 500 transmissions in 2021. Overhead costs for the engines are expected to be $10,000, while the overhead costs of the transmissions are expected to be $1,000.

a) Calculate the Overhead Application Rate if J&R Associates, Inc. were to use a single application rate.

b) Calculate the Overhead Application Rates if J&R Associates, Inc. were to use an activity-based costing method. (Be sure to identify which rate is for engines and which is for transmissions).

c) Which do you think is a better costing method for J&R Associates, Inc. Single Application Rate or Activity-Based Costing? Why?