The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.

An order for 1,000 boxes of medical-testing agent has the following production requirements.
Machine setups .................................................................................................. 5 setups
Raw material ........................................................................................... 10,000 pounds
Hazardous materials .................................................................................. 2,000 pounds
Inspections ............................................................................................... 10 inspections
Machine hours .................................................................................. 500 machine hours
Required:
1. Compute the total overhead that should be assigned to the medical-testing agent order.
2. What is the overhead cost per box of testing agent?
3. Suppose Tulsa Medical Supply 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 medical testing agent order?
a. In total.
b. Per box of testing agent.
5. Explain why these two product-costing systems result in such widely differing costs. Which system do you recommend? Why?

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Budgeted Budgeted Level Cost Driver 125 Activity Cost Pool Cost Driver Pool Rate $2,000 per setup $2 per pound $250,000 Number of setups Material hadling. Hazardous waste 5,000 Weight of raw material b. Weight of hazardous 25,000 5,000 Number of inspections 5,000 lb. 1,000 $5 per pound $75 per inspection $10 per machine hour chemicals used Quality control Other overhead costs 200,000 Machine hours $625,000 20,000