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Taylor Inc. established the following overhead cost pools and cost drivers: Budgeted Estimated Overhead Cost Pool Overhead Cost Driver Cost Driver Level Quality controls $780,000
Taylor Inc. established the following overhead cost pools and cost drivers:
Budgeted | Estimated | |||
Overhead Cost Pool | Overhead | Cost Driver | Cost Driver Level | |
Quality controls | $780,000 | # of inspections | 26,000 | inspections |
Machine setups | $720,000 | # of setups | 12,000 | setups |
Other overhead costs | $900,000 | # of machine hrs | 50,000 | machine hrs |
Total overhead costs | $2,400,000 | |||
A recent order for sailboats used: | ||||
Quality inspections | 750 | inspections | ||
Machine setups | 500 | setups | ||
Machine hours (MHs) | 2,400 | machine hours |
Required:
a. What is the overhead rate per machine hour if the number of machine hours (MHs) is used as a single cost driver under traditional costing system?
b. Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?
c. Utilizing ABC, how much total overhead is assigned to the order?
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