Please explain answer. Thank you in advance! Diamond Cleats Co. manufactures cle

Question

Please explain answer. Thank you in advance!

Diamond Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers: Overhead Cost Pool Cost Driver Overhead Cost Budgeted Level for Cost Driver Budgeted Quality Control # of inspections $78,000 1,200 Machine Time Machine hours 188,000 800 Materials Handling # of Batches 1,200 50 Miscellaneous Overhead Cost Direct labor hours 59,000 5,000 Diamond Cleats Co. has an order for cleats that has the following production requirements: Number of Inspections 375 Number of Machine hours 220 Number of Batches 8 Direct Labor Hours 840 (2)Using activity-based costing, applied quality control factory overhead for the baseball cleat order is: $28,450. $30,220. $24,375. $21,150. $19,600. (2)Using activity-based costing, applied machine overhead for the baseball cleat order is: $47,800. $55,300. $40,500. $59,150. $51,700.

Explanation / Answer

1. Budgeted Rate of cost driver # of inspections for Quality control overhead is 78000/1200= $65 per inspection.

So the Quality control OH for the Cleat order having 375 no inspections is 375*65= $24,375

2. Budgeted machine hour rate is =188000/800=$235 per machine hour

So the applied machine hour OH for Cleat order having 220 machine hrs =220*235=$51,700

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