Toyo Tires manufactures tires for dune buggies and has two different products, nubby tires and smooth tires. The company produces 5,000 nubby tires and 10,000 smooth tires each year and incurs $175,000 of overhead costs. The following information is available:

Activity Total Cost Cost Driver

Purchasing $75,000 Number of purchase orders

Testing 40,000 Number of tests

Inspections 60,000 Number of inspections

For the nubby tires, the company has 400 purchase orders, 200 tests, and 200 inspections. The smooth tires require 600 purchase orders, 300 tests, and 400 inspections.

Instructions

For each of the three activities listed above, compute the overhead rate.