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 Overhead Cost Driver 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
(a) 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?
(b) Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?
(c) Utilizing ABC, how much total overhead is assigned to the order?
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