Question

Crane Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $140,000, $240,000, and $54,000, respectively. The cost driver for each activity and the estimated annual usage are number of setups 2,000, machine hours 24,000, and number of inspections 1,200. Compute the overhead rate for each activity. Machine setups $ per setup Machining $ per machine hour Inspections $ per inspection

Answer 1

1. $70 per set up

2. $10 per machine hour

3. $45 per inspection

Step-by-step explanation:

With regards to the above,

Compute the overhead rate for

1. Machine set ups

= Estimated annual overhead cost / Estimated annual Number of setups

Estimated annual overhead costs = $140,000

Estimated annual Number of setups = 2,000

= $140,000 / 2,000

= $70 per set up

2. Machining

= Estimated annual overhead costs / Estimated annual Machine hours

Estimated annual overhead costs = $240,000

Estimated annual Machine hours = 24,000

= $240,000 / 24,000

= $10 per machine hours

3. Inspection

= Estimated annual overhead costs / Estimated annual number of inspections

Estimated annual overhead costs = $54,000

Estimated annual number of inspections = 1,200

= $54,000 / 1,200

= $45 per inspection