Question: Carmeli Instrument Inc. manufactures two products: missile range instruments and space pressure gauges. During January, 50 range instruments and 300 pressure gauges were produced, and

Carmeli Instrument Inc. manufactures two products: missile range instruments and space pressure gauges. During January, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $81,000 were incurred. An analysis of overhead costs reveals the following activities.

Cost Driver Number of requisitions Number of setups Number of inspections Total

The cost driver volume for each product was as follows.

Cost Activity 1. Materials handling 2. Machine setups 3. Quality inspections $30,000

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

Cost Driver Number of requisitions Number of setups Number of inspections Total Cost Activity 1. Materials handling 2. Machine setups 3. Quality inspections $30,000 27,000 24,000

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