Morgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $147,000, $409,600, and $99,000, respectively. The cost driver for each activity and the estimated annual usage are number of setups 2,100, machine hours 25,600, and number of inspections 1,800.Compute the overhead rate for each activity.

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-05-28T02:14:08+02:00

Answer:

Instructions are below.

Explanation:

Giving the following information:

Estimated annual overhead costs:

Machine setup= $147,000

Machining= $409,600

Inspections= $99,000

number of setups 2,100

machine hours 25,600

number of inspections 1,800

To calculate the estimated overhead rate, we need to use the following formula for each activity:

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

Machine setup:

Estimated manufacturing overhead rate= 147,000/2,100= $70 per setup

Machining:

Estimated manufacturing overhead rate= 409,600/25,600= $16 per machine hour

Inspections:

Estimated manufacturing overhead rate= 99,000/1,800= $55 per inspection