Sorce Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $89,500 were estimated. An analysis of estimated overhead costs reveals the following activities.

The cost driver volume for each product was as follows.

Instructions
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for April to the two products using activity-based costing.
(c) Write a memorandum to the president of Sorce Instrument explaining the benefits of activity-basedcosting.

Transcribed Image Text:

Activities Cost Drivers Total Cost 1. Materials handling 2. Machine setups 3. Quality inspections Number of requisitions Number of setups Number of inspections $35,000 27,500 27,000 $89,500 Cost Drivers Number of requisitions Number of setups Number of inspections Instruments 400 200 200 Gauges Total 1,000 500 600 600 300 400