Computing overhead rates based on different cost drivers
Gideon Industries produces two surge protectors. VC620 with six outlets and PH630 with eight outlets and two telephone line connections. Because of these product differences, the company plans to use activity-based costing to allocate overhead costs. The company has identified four activity pools.
Relevant information follows.
Cost Pool Total
Machine setup Machine operation Quality control Packaging$120,000
32,000Number of setups
Number of machine hours
Number of inspections
Number of units
Total overhead cost
Expected activity for each product follows.
of SetupsNumber of
a. Compute the overhead rate for each activity pool.
b. Determine the overhead cost allocated to each product.