Question

Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are:

Compute the overhead rate for each activity. Round your answers to two decimal places.
Activity Overhead per Activity Annual Usage Overhead Rate per Activity
Machine Setups $158,875 4,100
Machine Hours 352,775 14111
Inspections 120,750 3,500

Answer 1

To calculate the overhead rate for each activity, divide the overhead per activity by the annual usage. The rates are $38.75 per machine setup, $25.00 per machine hour, and $34.50 per inspection.

Step-by-step explanation:

The question relates to calculating the overhead rate for each activity in Rex Industries. The overhead rate is computed by dividing the total overhead cost allocated to each activity by the estimated annual usage of that activity. Here are the calculations:

Machine Setups Overhead Rate = $158,875 / 4,100 setups = $38.75 per setup

Machine Hours Overhead Rate = $352,775 / 14,111 hours = $25.00 per machine hour

Inspections Overhead Rate = $120,750 / 3,500 inspections = $34.50 per inspection

These rates help Rex Industries allocate overhead costs to products based on their usage of each activity, enabling more accurate costing and pricing decisions.

Answer 2

Machine Setups 38.75 per set up

Machine Hours 25.00 per machine hour

Inspections 34.50 per inspection

Step-by-step explanation:

Computation for the overhead rate for each activity.

Activity Overhead per Activity Annual Usage Overhead Rate per Activity

Machine Setups $158,875 ÷4,100=38.75 per set up

Machine Hours 352,775÷14111=25.00 per machine hour

Inspections 120,750÷ 3,500=34.50 per inspection

Therefore the overhead rate for each activity will be:

Machine Setups 38.75 per set up

Machine Hours 25.00 per machine hour

Inspections 34.50 per inspection