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