Question
Shaw Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $840,000 for an annual
Shaw Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. Currently, company is allocating its manufacturing overhead costs using a single plantwide OH rate based on number of pages. For 2019 Shaw Printers has decided to evaluate the use of additional cost pools based on ABC concept. 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 | $120,000 | 300 design changes |
Setups | 640,000 | 5,000 setups |
Inspections | 80,000 | 8,000 inspections |
Total manufacturing overhead costs | $840,000 |
|
During 2019, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
Activity | Money Managers | Hospital Systems |
Pages | 60,000 | 76,000 |
Design changes | 10 | 0 |
Setups | 20 | 10 |
Inspections | 30 | 38 |
Using current system, using pages printed as the only overhead cost driver, what is the factory overhead cost estimate for Money Managers during 2019?
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