Tidwell Industries has the following overhead costs and cost drivers. Direct lab

Question

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year.

If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

    Activity Cost Pool         Cost Driver         Est. Overhead         Cost Driver Activity     Ordering and Receiving Orders $   130000 500 orders Machine Setup Setups 306000 450 setups Machining Machine hours 1537500 125000 MH Assembly Parts 1220000 1000000 parts Inspection Inspections 310000 500 inspections

Explanation / Answer

Overhead application rate for ordering and receiving = Est. Overhead    / Cost Driver Activity     = $ 1,30,000 / 500 Orders = $ 260 per order

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