Question

Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.

For 2015 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:

Cost pool                          Manufacturing overhead costs             Activity level

Design changes                                                  $ 120,000    300 design changes

Setups                                                                  640,000               5,000 setups

Inspections                                                             80,000        8,000 inspections

   Total manufacturing overhead costs                   $840,000

During 2015, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

Activity                                                Money Managers       Hospital Systems

Pages                                                                     60,000                        76,000

Design changes                                                            10                               0

Setups                                                                          20                              10

Inspections                                                                   30                              38

25) Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

26) Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2015?

A) $13,700

B) $6,500

C) $6,860

D) $10,192

Answer 1

Question No. 25
Cost Pool	Cost Driver	Overhead Costs	Cost Driver Activity Level	Overhead Costs per cost Driver
Design Changes	Design Changes	$1,20,000	300	$            400.00
Setups	Setups	$6,40,000	5000	$            128.00
Inspection	Inspections	$    80,000	8000	$              10.00
Question No. 26
Total Manufacturing Overhead Cost
Option- C $ 6,860
Cost Pool	Cost Driver Activity Level	Overhead Costs per cost Driver	Manf Overheads
Design Changes	10	$   400.00	$        4,000.00
Setups	20	$   128.00	$        2,560.00
Inspection	30	$      10.00	$           300.00
Total Manufacturing Overheads	$        6,860.00