Q. Leonard Company produces two products: Zig and Zag. Overhead is estimated at $ 600,000 and the company expects to use 1,000 labor hours to produce Zig and 3,000 hours to produce Zag. Overhead is caused by purchase orders costing $ 120,000 inspections costing $ 270,000, and materials handling costing $ 210,000. The Company estimates the following activity information.

Zig Zag Total

Number of purchase orders 1,000 500 1,500

Number of Inspections 1,000 500 1,500

Number of times material is handled 1,500 500 2,000

Required:

1. Compute the amount of overhead assigned to each product using direct labor hours as the base.
2. Compute the purchase order, inspections and material handling rates.
3. Compute the amount of overhead assigned to each product using activity based costing.