Reference no: EM132710218

Problem 1: Mooshu Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $150,000, $325,000, and $87,500 respectively. The cost driver for each activity and the expected annual usage are: number of setups 2,500, machine hours 25,000, and number of inspections 1,750. Previously, the company estimated overhead costs based on machine hours, however, the company is now interested in exploring activity-based costing. The activity rate for inspections would be:

Option 1: $60 per inspection

Option 2: $321.43 per inspection

Option 3: $50 per inspection

Option 4: $22.50 per inspection