Question
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
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 PoolsCost Pool TotalCost DriverRepair and maintenance on assembly machine$104,000Number of units producedProgramming cost168,000Number of programming hoursSoftware inspections12,000Number of inspectionsProduct testing16,000Number of testsTotal overhead cost$300,000
Expected activity for each product follows:
Number of Units . Number of Programming Hours . Number of Inspections . Number of Tests
Decoder P16,000 2,000 190 1,400
Decoder Q36,000 1,500 60 1,100
Total 52,000 3,500 250 2,500
Required
- Compute the overhead rate for each activity pool.
- Determine the overhead cost allocated to each product.
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