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Bajrang Singh Bajrang Singh
wrote...
Posts: 1
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2 years ago
The controller for Ocean Sailboats Inc., a company which uses an automated process to make
sailboats, established the following overhead cost pools and cost drivers:
Overhead Cost Pool
Budgeted
Overhead Cost Driver
Estimated
Cost Driver Level
Machine setups $250,500 # of setups 500 setups
Quality control 419,500 # of inspections 2,500 inspections
Other overhead cost 180,000 # of machine hrs 20,000 machine hrs
A recent order for sailboats used:
Machine setups 50 setups
Quality inspections 305 inspections
Machine hours 2,024 machine hours
Required:
1. What is the overhead rate per machine hour if the number of machine hours is used as a single
cost driver under traditional costing system?
2. Utilizing traditional costing, how much overhead is assigned to the order based on machine
hours as a single cost driver?
3. Utilizing ABC, how much total overhead is assigned to the order?
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Replies
wrote...
Educator
2 years ago
1. Overhead rate = $ 42.50 / machine hour

2. Overhead cost assigned to order as per traditional approach = $ 86,020

3. Overhead cost assigned to order as per ABC method = $ 94,445
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