Question
Peter's Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $360,000 for an annual
Peter's Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $360,000 for an annual production capacity of 8 million pages.
For 2019, Peter's Printers has decided to evaluate the use of additional cost pools. After analyzing 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 costs
Activity level
Design changes
$60,000
400 design changes
Setups
260,000
5,000 setups
Inspections
40,000
8,000 inspections
Total manufacturing overhead costs
$360,000
During 2019, two customers, World Makers and Happy Studios, are expected to use the following printing services:
Activity
World Makers
Happy Studios
Pages
60,000
76,000
Design changes
10
0
Setups
20
10
Inspections
30
38
1.What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 8 million pages of production capacity?
a.$0.05 per page
b.$0.035 per page
c.$0.35 per page
d.$0.025 per page
e.$0.045 per page
2.Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for World Makers during 2019?
a.$2,500
b.$21,000
c.$1,500
d.$2,700
e.$2,100
3.Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?
a.$200 per change, $64 per setup, $5 per inspection
b.$150 per change, $52 per setup, $5 per inspection
c.$150 per change, $64 per setup, $5 per inspection
d.$150 per change, $60 per setup, $5 per inspection
e.$200 per change, $5 per setup, $64 per inspection
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