Calculate the overhead rate for each of the three activities

Reference no: EM131989022

Problem

Swimmer manufactures and sells professional and amateur grade goggles to various retail outlets. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $1,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:

Activity	Allocation Base	Proportion of Overhead Cost
Purchasing	Number of purchase orders	30%
Inspections	Number of inspections	45%
Sales	Number of sales orders	25%

The number of activities for professional and amateur grade goggles is as follows:

	Professional	Amateur
Number of purchase orders	3,000	7,000
Number of inspections	1,500	3,500
Number of sales orders	200	800

Required:

A. Calculate the total overhead that should be allocated to each of the three activities.

B. Calculate the overhead rates for each of the three activities.

C. If a single sales order requires 40 purchase orders and 30 inspections to fill, how much overhead should be applied to the order?

Reference no: EM131989022

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