ACC 560 MART Extraordinary Success/acc560mart.com ACC 560 MART Extraordinary Success/acc560mart.com | Page 21

Total estimated overhead costs are $240,000. Overhead cost allocated
to the machining activity cost pool is $140,000, and $100,000 is
allocated to the machine setup activity cost pool.
Instructions:
a. Compute the overhead rate using the traditional (plant wide)
approach.
b. Compute the overhead rates using the activity-based costing
approach.
c. Determine the difference in allocation between the two approaches.
E4-6
Santana Corporation manufactures snowmobiles in its Blue
Mountain, Wisconsin, plant. The following costs are budgeted for the
first quarter's operations.
Machine setup, indirect materials
4,000
Inspections 16,000
Tests 4,000
Insurance, plant 110,000
Engineering design 140,000
Depreciation, machinery 520,000
Machine setup, indirect labor 20,000
Property taxes
Oil, heating
29,000
19,000