The following overhead cost information is available for the Christopher Corporation for the prior year:

During the year, 8,000 purchase orders were issued; 25,000 shipments were received; 4,000 machine setups occurred; and 7,500 inspections were conducted. Employees worked a total of 10,000 hours on production. The corporate managers are trying to decide whether they should use a traditional overhead allocation method based on direct labor hours or switch to an activity-based costing system.

Required
A. Determine the overhead rate using the traditional overhead allocation method based on direct labor hours.
B. Determine the overhead rate for each of the activities assuming that activity-based costing isused.

Activity Purchasing Receiving Machine setups Quality control Allocation Base Number of purchase orders Number of shipments received Number of setups Number of inspections Overhead Cost $400,000 100,000 400,000 150,000