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Question - The controller for Ocean Sailboats Inc., a company which uses an automated process to make sailboats, established the following overhead cost pools and cost drivers: Overhead Cost Pool Budgeted Overhead Cost Driver Estimated Cost Driver Level Machine setups $250,500 # of setups 500 setups Quality control 419,500 # of inspections 2,500 inspections Other overhead cost 180,000 # of machine hrs 20,000 machine hrs A recent order for sailboats used: Machine setups 50 setups Quality inspections 305 inspections Machine hours 2,024 machine hours.
Required -
1. What is the overhead rate per machine hour if the number of machine hours is used as a single cost driver under traditional costing system?
2. Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?
3. Utilizing ABC, how much total overhead is assigned to the order?
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