Evaluate the overhead rate for each cost driver

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Reference no: EM134173

Question :
The Chinese Teapot Company manufactures ceramic and plastic teapots. The company's western plant has changed from a labor-intensive operation to a robotics environment. As a result, management is supposing changing from a direct-labor based overhead rate to an activity-based cost technique. The controller has chosen the subsequent activity cost pools and cost drivers for the factory overhead:

Expected

Overhead

Cost

Cost Driver

Annual

Cost Driver

Purchase orders $300,000 Number of orders 15,000 orders

Set-up costs $200,000 Number of set-ups 5,000 set-ups

Testing costs $320,000 Number of tests 8,000 tests

Machine maintenance $500,000 Machine hours 25,000 hours

REQUIRED:

a. Evaluate the overhead rate for each cost driver.

b. An order for 50 ceramic teapots had the subsequent needs:

Number of purchase orders 3

Number of set-ups 20

Number of product tests 7

Machine hours 150

How much overhead could be assigned to this order?

Reference no: EM134173

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