Machine hours 1,000 1,000 Setup hours 100 400
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