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Vernon Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because
Vernon 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 Pools | Cost Pool Total | Cost Driver | ||
Repair and maintenance on assembly machine | $ | 104,400 | Number of units produced | |
Programming cost | 91,650 | Number of programming hours | ||
Software inspections | 6,510 | Number of inspections | ||
Product testing | 6,670 | Number of tests | ||
Total overhead cost | $ | 209,230 | ||
Expected activity for each product follows:
Number of Units | Number of Programming Hours | Number of Inspections | Number of Tests | |||||||||
Decoder P | 16,000 | 1,900 | 192 | 1,500 | ||||||||
Decoder Q | 42,000 | 2,000 | 118 | 1,400 | ||||||||
Total | 58,000 | 3,900 | 310 | 2,900 | ||||||||
Required
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Compute the overhead rate for each activity pool.
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Determine the overhead cost allocated to each product.
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