Waterway, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 200 pressure gauges were produced, and overhead costs of $87,550 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities Cost Drivers Total Cost
1. Materials handling Number of requisitions $40,800
2. Machine setups Number of setups 25,750
3. Quality inspections Number of inspections 21,000
$87,550
The cost driver volume for each product was as follows.
Cost Drivers Instruments Gauges Total
Number of requisitions 420 630 1,050
Number of setups 225 260 485
Number of inspections 265 225 490
Air United, Inc. manufactures two products: missil
Air United, Inc. manufactures two products: missil
Determine the overhead rate for each activity.
Overhead Rate
Materials handling $
Machine setups $
Quality inspections $

Results are below.

Explanation:

Giving the following information:

Activities Cost Drivers Total Cost

Materials handling Number of requisitions $40,800

Machine setups Number of setups 25,750

Quality inspections Number of inspections 21,000

Cost Drivers Instruments Gauges Total

Number of requisitions= 1,050

Number of setups= 485

Number of inspections= 490

We need to use the following formula for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Materials handling= 40,800/1,050= $38.86 per requisition

Machine setups= 25,750/485= $53.1 per setup

Quality inspections= 21,000/490= $42.86 per inspection

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