Question

Marigold, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2020. Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers per Activity Ordering and receiving$111,70615,800 orders Food processing 465,69057,000 machine hours Packaging 1,485,800437,000 labor hours For 2020, the company had 10,900 orders and used 49,600 machine hours, and labor hours totaled 506,000. Calculate the overhead rates for each activity.

Answer 1

Answer and Explanation:

The computation of the overhead rate for each activity is shown below:

                   (a)                        (b)                   (a divided by b )

Overhead     Cost Pool       Cost Driver         Overheads rate

Ordering

and receiving $111,706         15,800               $7.07 per order

Food Processing$465,690  57,000             $8.17 per machine hour

Packaging    $1,485,800   437,000         $3.14 per labor hour