Reference no: EM132746412

Problem - Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow.

	V-1	V-2
Units produced	10,000	1,000
Direct materials cost per unit	$2	$4
Machine hours per unit	1	2
Production runs per month	80	40

Production at the plant is automated and anyr labor cost is included in overhead. Data on manufacturing overhead at the plant follow.

Machine depreciation	$78,000
Setup labor	34,800
Material handling	17,760
Total	$130,560

Required -

a. Upriver currently applies overhead on the basis of machine hours. What is the predetermined overhead rate for the month?

b. Upriver is thinking of adopting an ABC system. They have tentatively chosen the following cost drivers: machine hours for machine depreciation, production runs for setup labor, and direct material dollars for material handling. Compute the cost driver rates for the proposed system at Upriver.