Sonica Ltd., manufactures medical ultrasound products. The ultrasound products require high precision and rigorous testing before they are sold. The annual overhead cost for quality control is $650,000, and all units produced have to be tested for quality control. Sonica makes 4 product lines. The quality control is set up to test 200 batches and 5,000 units a year.

REQUIRED

A. What is the overhead rate based on the product-level allocation base? How much of the overhead cost for quality control should be allocated to Product A, if 1,350 units are produced in 45 batches, using the product level as the allocation base?
B. What is the overhead rate based on the batch-level allocation base? How much of the overhead cost for quality control should be allocated to Product A, if 1,350 units are produced in 45 batches, using the batch level as the allocation base?
C. What is the overhead rate based on the unit-level allocation base? How much of the overhead cost for quality control should be allocated to Product A, if 1,350 units are produced in 45 batches, using the unit level as the allocation base?
D. If you were the manager for Product A, which level of allocation base would you prefer?
E. If you were the cost accountant for Sonica, which level of allocation base would you recommend that Sonica uses? Explain.