Reference no: EM132032167

Exercise - Computing overhead rates based on different costing drivers

Fenya Industries produces two surge protectors: K2761 with six outlets and D3354 with eight outlets and two telephone line connections. Because of these product differences, the company plans to use activity-based costing to allocate overhead costs. The company has identified four activity pools.

Activity Pools	Cost Pool Total	Cost Driver
Machine setup	$144,000	Number of setups
Machine operation	360,000	Number of machine hours
Quality control	57,600	Number of inspections
Packaging	38,400	Number of units
Total overhead cost	$600,000

Expected activity for each product follows:

	Number of setups	Number of machine hours	Number of inspections	Number of units
K2761	48	1,400	78	25,000
D3354	72	2,600	172	15,000
Total	120	4,000	250	40,000

Required

a. Compute the overhead rate for each activity pool.

b. Determine the overhead cost allocated to each product.