Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. The traditional and the activity-based costing systems assign the same amount of direct materials and direct labor costs.

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 Air United explaining the benefits of activity-based costing.

Transcribed Image Text:

Cost Drivers Number of requisitions Number of setups Number of inspections Instruments 400 200 200 Gauges 600 300 400 Total 1,000 500 600