Fontillas Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, it produced 50 range instruments and 300 pressure gauges and incurred estimated overhead costs of $94,500. 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 Fontill as Instrument explaining the benefits of activity-based costing.

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Total Cost Activities 1. 2. Machine set-ups 3. Quality inspections Cost Drivers Materials handlingNumber of requisitions$40,000 Number of set-ups Number of inspections 27,500 27,000 $94,500 Cost Drivers Number of requisitions Number of set-ups Number of inspections Instruments 400 200 200 Gauges 600 300 400 Total 1,000 450 600