Bark Manufacturing has three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $80,000, $162,500, and $28,000, respectively. The expected annual use in each department is 1,000 setups, 12,500 machine hours, and 875 inspections.

Compute the overhead rate for each activity.

Question

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zainsubhani zainsubhani · Answer 1 · 2020-04-07T06:05:26+02:00

Answer:

For Machine Setup:

Overhead=$80 per setup

For Machining:

Overhead=$13 per machine hours

For inspections:

Overhead=$32 per inspections

Explanation:

Given Data:

Overhead cost for machine setups=$80,000

Overhead cost for machining=$162,500

Overhead cost for inspections=$28,000

Expected annual use in machine setups=1,000 setups

Expected annual use in machining=12,500 machine hours

Expected annual use in inspections=875 inspections.

Required:

Overhead rate for each activity=?

Solution:

For Machine Setup:

Overhead=[tex]\frac{Overhead\ Cost}{Annual\ use}[/tex]

Overhead=[tex]\frac{\$80,000}{1000}[/tex]

Overhead=$80 per setup

For Machining:

Overhead=[tex]\frac{Overhead\ Cost}{Annual\ use}[/tex]

Overhead=[tex]\frac{\$162,500}{12,500}[/tex]

Overhead=$13 per machine hours

For inspections:

Overhead=[tex]\frac{Overhead\ Cost}{Annual\ use}[/tex]

Overhead=[tex]\frac{\$28,000}{875}[/tex]

Overhead=$32 per inspections