Farrington, Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2016 and their allocation bases are as follows:

Farrington expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time.
Requirements
1. Compute the predetermined overhead allocation rate for each activity.
2. Compute the expected indirect manufacturing cost of each bumper.

Transcribed Image Text:

Activity Materials handling Machine setup Insertion of parts Finishing Total Total Budgeted Cost Allocation Base S 6,000 3,200 51,000 80,000 $140,200 Number of parts Number of setups Number of parts Finishing direct labor hours