Check my Work Exercise 56A Computing overhead rates based on

Check my Work Exercise 5-6A Computing overhead rates based on different cost drivers LO 5-2, 5-3 Rooney Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows Cost Pool Total Activity Pools Repair and maintenance on assembly machine 88,000 Number of units produced Programming cost Software inspections Product testing Total overhead cost Cost Driver 105, 600 Number of programming hours 7,360 Number of inspections 12,600 Number of tests $213,560 Expected activity for each product follows Number of Number of Programming Decoder P Decoder o Total Units 18,000 37,000 55,000 Hours 1,800 2,600 4,400 Number of Inspections 193 127 320 Number of Tests 1,500 1,500 3,000

Solution

Total AllocatedCost

Decoder Q

Activity Pools	Allocation Rate
Repair and maintenance on assembly machine = Total cost ÷ Total number of units = 88,000÷55,000	$1.60
Programming cost = Total cost ÷ Total number of programming hours = 105,600÷4,400	$24
Software inspections = Total cost ÷ Total number of inspections = 7,360÷320	$23
Product testing = Total cost ÷ Total number of tests = 12,600÷3,000	$4.20