Reference no: EM132536992
Peter's Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2019, manufacturing overhead cost estimates total $360,000 for an annual production capacity of 8 million pages.
For 2019, Peter's Printers has 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 $60,000 400 design changes
Setups 260,000 5,000 setups
Inspections 40,000 8,000 inspections
Total manufacturing overhead costs $360,000
During 2019, two customers, World Makers and Happy Studios, are expected to use the following printing services:
Activity World Makers Happy Studios
Pages 60,000 76,000
Design changes 10 0
Setups 20 10
Inspections 30 38
Question 1. What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 8 million pages of production capacity?
a. $0.05 per page
b. $0.035 per page
c. $0.35 per page
d. $0.025 per page
e. $0.045 per page
Question 2. Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for World Makers during 2019?
a. $2,500
b. $21,000
c. $1,500
d. $2,700
e. $2,100
Question 3. Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?
a. $200 per change, $64 per setup, $5 per inspection
b. $150 per change, $52 per setup, $5 per inspection
c. $150 per change, $64 per setup, $5 per inspection
d. $150 per change, $60 per setup, $5 per inspection
e. $200 per change, $5 per setup, $64 per inspection
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