Major 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 $94,500 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 Major Instrument explaining the benefits of activity-basedcosting.

Transcribed Image Text:

DriversTotal Cost Activities 1. Materials handlin Number of requisitions $40,000 2. Machine setups 3. Quality inspectionsNmber of inspections Nunber of setups 27,500 $94,500 Cost Drivers Instruments 400 200 200 Gauges 600 300 400 Total Number of requisitions Number of setups Number of inspections 1,000 500 600