### Activity-Based Costing: Identifying Cost Drivers and Overhead Rates#### LO 6.3 Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are as follows:| **Activity** | **Overhead per Activity** | **Annual Usage** ||-------------------|---------------------------|------------------|| Machine setups | $155,000 | 4,000 || Machine hours | $352,800 | 14,112 || Inspections | $120,750 | 3,500 |---**Task:** Compute the overhead rate for each activity. **Solution:**To compute the overhead rate for each activity, divide the total overhead cost by the total usage for each corresponding activity.- **Machine setups overhead rate:** \[ \text{Overhead Rate} = \frac{\$155,000}{4,000} = \$38.75 \text{ per setup} \]- **Machine hours overhead rate:** \[ \text{Overhead Rate} = \frac{\$352,800}{14,112} = \$25 \text{ per hour} \]- **Inspections overhead rate:** \[ \text{Overhead Rate} = \frac{\$120,750}{3,500} = \$34.50 \text{ per inspection} \]This analysis will help allocate overhead costs more accurately based on the actual consumption of resources associated with each activity.

Overhead Rate = ( Overhead per Activity / Annual Usage of such Activity )

LO 6.3Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Activity Overhead per Activity Annual Usage Machine setups Machine hours $155,000. 352,800 120,750 4,000 14,112 3,500 Inspections Compute the overhead rate for each activity.

LO 6.3Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Activity Overhead per Activity Annual Usage Machine setups Machine hours $155,000. 352,800 120,750 4,000 14,112 3,500 Inspections Compute the overhead rate for each activity.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity. Round your answers to two decimal places. Overhead Overhead Annual Rate per Activity per Activity Usage Activity Machine Setups $157,850 4,100 $ Machine Hours 324,622 14,114 2$ Inspections 119,000 3,400
Multiple Choice $9,907.97 $89,171.73 $5,173.02 $136.51
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Use three different activities as cost drivers, machine setups, machine hours, and inspections to compute the overhead rate for each activity. Activity Overhead per Activity Annual Usage Machine Setups $75,000 6,000 Machine Hours $85,002 5,484 Inspections 70,000 20,000
Senff Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Activity Cost Pools Setting up batches Processing customer orders Assembling products Data concerning two products appear below: Number of batches Number of customer orders Number of assembly hours Activity Rate $ 82.25 per batch $ 73.65 per customer order $ 9.01 per assembly hour Product V91Z 76 21 493 Product V211 13 10 698 How much overhead cost would be assigned to Product V91Z using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.)
Heidelberg Fabrication manufactures two products, G-09 and G-35: Units produced Direct materials cost per unit Machine-hours per unit Production runs per quarter Machine depreciation Setup labor Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow: Materials handling Total G-09 19,700 $ 7 4 G-35 3,940 $ 19 7 72 $ 106,380 53,190 42,552 $ 202,122 a. Overhead rate b. Machine depreciation b. Setup labor b. Materials handling Exercise 9-36 (Algo) Activity-Based Costing and Cost Driver Rates (LO 9-4) Required: a. Heidelberg currently applies overhead on the basis of machine-hours. What is the predetermined overhead rate for the quarter? Note: Round your answer to 2 decimal places. b. Heidelberg is thinking of adopting an ABC system. They have tentatively chosen the following cost drivers: machine-hours for machine depreciation, production runs for setup labor, and direct material dollars for materials handling.…