Custom's has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are: Cost Pool Material Machining Inspection Material requisitions Machine hours Number of inspections • Material cost pool Custom's data • Machining cost pool Cost Driver Inspection cost pool Estimated Activity per Driver 14,000 186,400 10,000 Estimated Overhead $52,500 What is the predetermined overhead rate for each activity? Round to the nearest penny, two decimal places. 363,500 75,000
Custom's has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are: Cost Pool Material Machining Inspection Material requisitions Machine hours Number of inspections • Material cost pool Custom's data • Machining cost pool Cost Driver Inspection cost pool Estimated Activity per Driver 14,000 186,400 10,000 Estimated Overhead $52,500 What is the predetermined overhead rate for each activity? Round to the nearest penny, two decimal places. 363,500 75,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Custom's has three cost pools and an associated cost driver to allocate the costs to
the product. The cost pools, cost driver, estimated overhead, and estimated activity
for the cost pool are:
Cost Pool
Material
Machining
Inspection
• Material cost pool
.
Material
requisitions
Machine hours
Number of
inspections
• Machining cost pool
Custom's data
Cost Driver
Inspection cost pool
Estimated Activity
per Driver
14,000
186,400
10,000
Estimated
Overhead
What is the predetermined overhead rate for each activity? Round to the nearest
penny, two decimal places.
$52,500
363,500
75,000
Expert Solution
Step 1
Activity Based Costing (ABC Costing) is a method of costing which assigns overhead and Indirect Costs to related products and services. It provides a better and more accurate method of product / service costing which leads to more accurate pricing decisions.
Cost Drivers are all those activities which are done that cost money to make the product. Cost Pools are a group of related costs into which various cost drivers are divided.
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