Rapid City Technology, Inc. manufactures chemicals used in agricultural pest control. The controller has established the following activity cost pools and cost drivers.

An order for 1,000 boxes of a chemical product designated JLRP has the following production requirements.
Machine setups............................................................... 6 setups
Raw material................................................................... 9,000 pounds
Hazardous materials........................................................ 2,100 pounds
Inspections...................................................................... 8 inspections
Machine hours................................................................ 550 machine hours

Required:
1. Compute the total overhead that should be assigned to the JLRP order.
2. What is the overhead cost per box of JLRP chemicals?
3. Suppose the company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement (3), how much overhead would be assigned to the JLRP chemical order?
a. In total.
b. Per box of JLRP chemical.
5. Explain why these two product-costing systems result in such widely differing costs. Which system do you recommend? Why?
6. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1), (2), (3), and (4) above. Show how the solution will change if the following data change. The overhead associated with machine setups is $500,000, and there are 1,000 inspections budgeted.

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Budgeted Overhead Cost Budgeted Level for Cost Driver Activity Cost Pool Machine setups.. Material handling Hazardous waste Cost Driver Pool Rate S1,000,000 Number of setups 250 $4,000 per setup 300,000 Weight of raw material 75,000 Ib $4 per pound Weight of hazardous control Quality control 100,000 300,000 800,000 chemicals used Number of inspections Machine hours 10,000 Ib. 2,000 40,000 $10 per pound $150 per inspection $20 per machine hour Total S2,500,000