Question
The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers. Activity Cost Pool Budgeted Overhead Cost Cost Driver
The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.
Activity Cost Pool | Budgeted Overhead Cost | Cost Driver |
| Budgeted Level for Cost Driver | Pool Rate | |||||||
Machine setups | $ | 312,500 |
| Number of setups |
| 125 |
|
| $ | 2,500 | per setup |
|
Material handling |
| 50,000 |
| Weight of raw material |
| 25,000 | lb. |
| $ | 2 | per pound |
|
Hazardous waste control |
| 25,000 |
| Weight of hazardous chemicals used |
| 5,000 | lb. |
| $ | 5 | per pound |
|
Quality control |
| 75,000 |
| Number of inspections |
| 1,000 |
|
| $ | 75 | per inspection |
|
Other overhead costs |
| 250,000 |
| Machine hours |
| 25,000 |
|
| $ | 10 | per machine hour |
|
Total | $ | 712,500 |
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An order for 1,000 boxes of medical-testing agent has the following production requirements.
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Machine setups | 5 | setups |
Raw material | 10,000 | pounds |
Hazardous materials | 2,000 | pounds |
Inspections | 10 | inspections |
Machine hours | 600 | machine hours |
Required: 1. Compute the total overhead that should be assigned to the medical-testing agent order. 2. What is the overhead cost per box of testing agent? 3. Suppose Tulsa Medical Supply Company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour. 4. Under the approach in requirement 3, how much overhead would be assigned to the medical-testing agent order? a. In total. b. Per box of testing agent.
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