Spin Cycle Company uses three activity pools to apply overhead to its products.
ID: 2408450 • Letter: S
Question
Spin Cycle Company uses three activity pools to apply overhead to its products. Each activity has a cost driver used to allocate the overhead costs to the product. The activities and related overhead costs are as follows: product design $44,000; machining $330,000; and material handling $110,000. The cost drivers and expected use are as follows. Expected Use of Cost Drivers per Activity Cost Drivers Product design Machining Material handlingNumber of set-ups Activities Number of product changes Machine hours 10 153,000 94 Calculate the predetermined overhead rate for each activity. (Round answers to 2 decimal places, e.g. 15.25.) Activit Overhead Rate Product design Machining Material handling per product change per machine hr per set-up Classify each of these activities as unit-level, batch-level, product-level, or facility-level Product design Machining Material handlingExplanation / Answer
A). Predetermined rate computation for each activity:
1.Predetermined rate for Product Design =$44000/10 = $4400 per product change
2. Predetermined rate for machining = $330000/153000 = $2.16 per machine hour
3.Predetermined rate for machine handling = $110000/94 = $ 1170 per set up.
B)The Production Design is of Product Level
The Machining is of Unit Level
The material handlin is of Batch level