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QUESTION:

George Inc. manufactures two products for use in the manufacturing of mining equipment: PT gears and XR gears.

During the past month the company produced 50 PT gears and 300 XR gears and incurred an estimated total overhead of $94,410.

The company's accountant analyzed the overhead costs and determined the following with regards to the activities which caused the costs:

Activity	Budgeted Overhead	Activity Driver
Material handling	Number of material moves	$33,350
Machinery set up	Number of set ups	$28,500
Inspections	Number of inspections	$32,560
	Total costs	$94,410

The activity driver for each product and in total was as follows:

Activity Driver	PT Gears	XR Gears	Total
Number of material moves	520	630	1150
Number of set ups	170	400	570
Number of inspections	270	470	740

What is the activity rate that would be used for material handling?

HINT: remember to apply the entry rules.

What is the activity rate that would be used for machinery set up?

HINT: remember to apply the entry rules.

What is the activity rate that would be used for Inspections?

HINT: remember to apply the entry rules.

Assign the manufacturing overhead for the past month to the two products using activity based costing. What is the overhead cost PER UNIT for PT Gears?

HINT: calculate the total overhead assigned to each product and then divide by the number of products produced to determine the overhead cost per unit!

Assign the manufacturing overhead for the past month to the two products using activity based costing. What is the overhead cost PER UNIT for XR Gears?

HINT: calculate the total overhead assigned to each product and then divide by the number of products produced to determine the overhead cost per unit!

Assume, instead, that the company used a plantwide overhead rate and the cost driver of direct labour hours.

The company has the following information:

Cost Driver	PT Gears	XR Gears	Total
Direct labour hours	540	1,260	1,800

What is the plantwide rate per direct labour hour?

Assign the manufacturing overhead for the month to each product using the plantwide overhead rate.

What is the per unit overhead cost for PT Gears if the company used the plantwide rate?

HINT: remember the entry rules!

What is the per unit overhead cost for XR Gears if the company used the plantwide rate?

HINT: remember the entry rules!

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