Question: TechSolutions Inc. is transitioning to Activity-Based Costing (ABC) to allocate its overhead costs more accurately. The company identifies four major activities: Product Design, Manufacturing Setup,

TechSolutions Inc. is transitioning to Activity-Based Costing (ABC) to allocate its overhead costs more accurately. The company identifies four major activities: Product Design, Manufacturing Setup, Production Run, and Quality Control. Each activity requires different resources and drives overhead costs differently. TechSolutions Inc. provides the following information:

  • Product Design Costs: $100,000
  • Manufacturing Setup Costs: $150,000
  • Production Run Costs: $200,000
  • Quality Control Costs: $80,000

The activity drivers and usage for each activity are as follows:

  • Product Design: Number of design hours - 1,000 hours
  • Manufacturing Setup: Number of setups - 20 setups
  • Production Run: Machine hours - 5,000 hours
  • Quality Control: Number of inspections - 500 inspections

Calculate the overhead cost allocation rates for each activity using the ABC approach.

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