Reference no: EM132595499

GBC Printing has contracts to complete weekly supplements required by forty-six customers. For the year 2016, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 10 million pages.

For 2016 GBC Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:

Cost pool                             Manufacturing overhead costs            Activity level

Design changes                           $60,000                                       200 design changes

Setups                                          320,000                                        4,000 setups

Inspections                                       40,000                                       16,000 inspections

Total manufacturing overhead costs         420,000

During 2016, two customers, Rock & Roll and Kingston Inc, are expected to use the following printing services:

Activity                                       Rock & Roll Inc.                    Kingston Inc.

Pages                                    60,000                                  76,000

Design changes                               10                                        2

Setups                                             20                                   10

Inspections                                         30                                  38

Question A) If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity, what is the cost driver rate?

Question B) Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for Kingston Inc. during 2016?

Question C) Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

Question D) Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Kingston Inc. during 2016?