The Chinese Teapot Company manufactures plastic and ceramic teapots. The company's western plant has changed from a labor-intensive operation to a robotics environment. As a result, management is considering changing from a direct-labor based overhead rate to an activity-based cost method. The controller has chosen the following activity cost pools and cost drivers for the factory overhead:

Expected

Overhead

Cost

Cost Driver

Annual

Cost Driver

Purchase orders $300,000 Number of orders 15,000 orders

Set-up costs $200,000 Number of set-ups 5,000 set-ups

Testing costs $320,000 Number of tests 8,000 tests

Machine maintenance $500,000 Machine hours 25,000 hours 

REQUIRED:

a. Compute the overhead rate for each cost driver.

b. An order for 50 ceramic teapots had the following requirements:

Number of purchase orders .... 3

Number of set-ups ....... 20

Number of product tests ...... 7

Machine hours ..........150

How much overhead would be assigned to this order?