L$13$ EXERCISE $17\mathrm{.}4$

Overhead

$106$ Cost Drivers; Determination and Use of Unit Cost

During June, Assembly Department no$.4$ of Riverview Electronics produced $12,000$ model $201$ computer keyboards. Assembly of these units required $1,476$ hours of direct labor at a cost of $$26,400,$ direct materials costing $$318,960,$ and $2,880$ hours of machine time. Based on an analysis of overhead costs at the beginning of the year, overhead is applied to keyboards using the following formula:

Overhead $=75\%$ of Direct Labour Cost $+$$$32$ per Machine Hour

a$.$ Compute the total amount of overhead cost applied to the $12,000$ keyboards.

b$.$ Compute the per$-$unit cost of manufacturing these keyboards.

c$.$ Briefly explain why the department might use two separate activity bases in applying overhead costs to one type of product.

d$.$ Identify at least two types of overhead cost pools that might be "driven" by each of the two cost drivers indicated in this situation.

e$.$ What appears to be the primary driver of overhead costs in the manufacture of keyboards?

f$.$ Compute the gross profit that will result from the sale of $2,000$ of these keyboards at a sales