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Question 3: Allocate overhead costs using Activity-Based-Costing Stroud Corporation produces two types of bicycles, leisure and sport. The company only recently began producing the leisure bicycle Management believes the accounting system may not be accurately allocating costs to products and has asked you to investigate the cost allocation problem. You found that manufacturing overhead is currently assigned based on the direct labor costs in the products. For your investigation, you are using data from last year. Last year's manufacturing overhead was $475,000 based on production of 100.000 leisure bicycles and 117,100 sport bicycles. Direct materials and direct labor costs were as follows: Direct materials Direct labor Leisure Bicycle Sport Bicycle Total $ 125.000 $ 175,000 $ 300.000 $ 107,500 $ 143,000 $ 250,500 Management believes three activities drive overhead costs. The cost drivers and related costs for your analysis are as follows: Cost Driver Number of production runs Quality tests performed Shipping orders processed 500 Activity Level Leisure Bicycle Sport Bicycle 500 3,000 2,000 45,000 105,000 Cost $100,000 $ 150,000 $225,000 $ 475,000 Total 1,000 5,000 150,000 Required: 1. Using the Activity-based Costing (ABC) assignment method, calculate the overhead allocation rate for each of the following cost drivers: a Number of production runs b. Number of quality tests performed c. Number of shipping orders processed 2. Using the Activity-based Costing (ABC) assignment method, how much is the total allocated overhead cost for the Leisure Bicycles: and for the Sport Bicycles: 3. Using the Activity-based Costing (ABC) assignment method, how much is the total product cost per unit for the Leisure Bicycles: and for the Sport Bicycles

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