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TechSolutions Inc. is transitioning to Activity-Based Costing (ABC) to allocate its overhead costs more accurately. The company identifies four major activities: Product Design, Manufacturing Setup,
TechSolutions Inc. is transitioning to Activity-Based Costing (ABC) to allocate its overhead costs more accurately. The company identifies four major activities: Product Design, Manufacturing Setup, Production Run, and Quality Control. Each activity requires different resources and drives overhead costs differently. TechSolutions Inc. provides the following information:
- Product Design Costs: $100,000
- Manufacturing Setup Costs: $150,000
- Production Run Costs: $200,000
- Quality Control Costs: $80,000
The activity drivers and usage for each activity are as follows:
- Product Design: Number of design hours - 1,000 hours
- Manufacturing Setup: Number of setups - 20 setups
- Production Run: Machine hours - 5,000 hours
- Quality Control: Number of inspections - 500 inspections
Calculate the overhead cost allocation rates for each activity using the ABC approach.
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