Chapter 19, Problem 2QC

Compute It uses activity-based costing. Two of Compute It’s production activities are kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Compute It spends $960,000 per month on kitting and $32,000 per month on boxing. Compute It allocates the following:

• Kitting costs based on the number of parts used in the computer
• Boxing costs based on the cubic feet of space the computer requires

Suppose Compute It estimates it will use 400,000 parts per month and ship products with a total volume of 6,400 cubic feet per month.

Assume that each desktop computer requires 125 parts and has a volume of 2 cubic feet.

What are the predetermined overhead allocation rates?