Chapter 4, Problem 4.2DI

Compute activity-based overhead rates and assign overhead using ABC.

(LO 2),AP

Flynn Industries has three activity cost pools and two products. It expects to produce 3,000 units of Product BC113 and 1,500 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers.

Annual Overhead Data
Activity Cost Pools	Cost Drivers			Estimated Overhead
Machine setup	Setups			$ 16,000
Machining	Machine hours			110,000
Packing	Orders			30,000
Expected Use of Cost Drivers per Product
Expected Use of Cost Drivers per Activity		Product BC113	Product AD908
40		25	15
5,000		1,000	4,000
500		150	350

Using the above data, do the following:

(a) Prepare a schedule showing the computations of the activity-based overhead rates per cost driver.

(b) Prepare a schedule assigning each activity's overhead cost to the two products.

(c) Compute the overhead cost per unit for each product. (Round to nearest cent.)

(d) Comment on the comparative overhead cost per product.