Peter's Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $350,000 for an annual production capacity of 1 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

250,000

5,000 setups

Inspections

40,000

10,000 inspections

Total manufacturing overhead costs

$350,000

During 2019, two customers, World Makers and Happy Studios, are expected to use the following printing services:

Activity

World Makers

Happy Studios

Pages

8,000

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 1 million pages of production capacity?

a.$0.03 per page

b.$0.05 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.$18,000

b.$2,100

c.$21,000

d.$1,500

e.$2,800

3.Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

a.$150 per change, $65 per setup, $4 per inspection

b.$150 per change, $50 per setup, $4 per inspection

c.$150 per change, $50 per setup, $5 per inspection

d.$150 per change, $75 per setup, $4 per inspection

e.$150 per change, $4 per setup, $50 per inspection