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10 June, 10:36

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 150000 500 orders Machine Setup Setups 324000 450 setups Machining Machine hours 1587500 125000 MH Assembly Parts 1260000 1000000 parts Inspection Inspections 330000 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

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  1. 10 June, 12:14
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    Overhead rate for ordering and receiving = $300 per order.

    Explanation:

    Given Activity costs and activity drivers

    Activity Overhead Cost Driver Activity

    Ordering & Receiving Order $150,000 500 orders

    Machine Setup $324,000 450 setups

    Machining $1,587,500 125,000 MH

    Assembly Parts $1,260,000 1,000,000 parts

    Inspection $330,000 500 inspections

    Under activity based costing the rates are based on the nature of activity and the rates are based on number of those activities per driver. As for ordering and receiving there are total of 500 orders and total cost = $150,000 that is cost per order will be computed.

    Overhead rate for ordering and receiving = $150,000/500 orders = $300 per order.
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