Solved:
Answered by AI, Verified by Human Experts
Morgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $150,000, $375,000, and $87,500, respectively. The cost driver for each activity and the expected annual usage are number of setups 2,500, machine hours 25,000, and number of inspections 1,750.
Morgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $150,000, $375,000, and $87,500, respectively. The cost driver for each activity and the expected annual usage are number of setups 2,500, machine hours 25,000, and number of inspections 1,750.Compute the overhead rate for each activity.
Machine setups $ per setup
Machining $ per machine hour
Inspections $ per inspection
Answer:Machine setup= $60 per setupMachining= $15 per machine hourInspections= $50 per inspectionExplanation:Giving the following information:Estimated overhead costs:Machine setup= 150,000Machining= 375,000Inspections= 87,500The cost driver for each activity and the expected annual usage are number of setups 2,500, machine hours 25,000, and number of inspections 1,750.To calculate the estimated manufacturing overhead rate we need to use the following formula:Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation baseMachine setup= 150,000/2,500= $60 per setupMachining= 375,000/25,000= $15 per machine hourInspections= 87,500/1,750= $50 per inspection...