Question

Sanborn Industries has the following overhead costs and cost drivers. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is:___________ (the overhead application rate for ordering and receiving = estimated overhead for ordering and receiving / cost driver activity for ordering and receiving)

(a) $1.20 per direct labor hour.
(b) $6,834 per order.
(c) $240 per order.
(d) $0.12 per part.

Answer 1

Predetermined manufacturing overhead rate= $240 per order

Step-by-step explanation:

Giving the following information:

Ordering and Receiving Orders $ 120,000 500 orders

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= 120,000/500

Predetermined manufacturing overhead rate= $240 per order