Required 5-6: Use Excel worksheet to

A. Compute the overhead rate for each activity pool

B. Determine the overhead cost allocation to each product.

Question 5-7 A-C:

D Exercise 5-6A Computing overhead rates based on different cost drivers Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Activity Pools Cost Pool Total Cost Driver Repair and maintenance on assembly machine $ 104,000 Number of units produced Programming cost 168,000 Number of programming hours Software inspections 12,000 Number of inspections Product testing 16,000 Number of tests Total overhead cost $300,000 Expected activity for each product follows. Number of Units Number of Programming Hours Number of Inspections Number of Tests Decoder P 16,000 2,000 190 1,400 Decoder Q 36.000 1,500 60 1,100 Total 52,000 3,500 250 2,500 Use the information in Exercise 5-6A to complete the following requirements. Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow. Direct Labor Hours Decoder P 8,000 Decoder Q 16,000 Total 24,000 Required a. Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base. Page 229 b. Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC. Round your figures to two decimal points. c. Explain why the per-unit overhead cost is lower for the high-volume product when using ABC