1. The cost driver for each overhead cost pool.
Activity Cost Driver Rate
Machining Machine - hours $440,000 / 110,000 $4 per machine hour
(40,000 + 70,000 = 110,000)
Set Up Production runs $110,000 / 100 $1,100 per production run
(40,000 + 70,000 = 110,000)
(50 + 50 = 100)
Inspection Inspection-hours $120,000 / 2,000 $60 per inspection
(1,200 + 800 = 2,000 )
Manufacturing overhead cost per unit
Particulars Mathematical Financial
Machining $160,000 $280,000
(40,000 $4) (70,000 × $4)
Set Up $55,000 $55,000
(50 ×$1,100)(50× $1,100)
Inspection $72,000 $48,000
(1,200 × $60) (800 $60)
Total manufacturing costs $287,000 $383,000
Number of Units 25,000 50,000
Manufacturing overhead cost per unit $11.48 $7.66
($287,000/25,000) ($383,000/50,000)
2. The manufacturing cost per unit for each product
Manufacturing cost per unit
Particulars Mathematical Financial
Direct Materials $3.00 $3.00
($75,000 / 25,000) ($150,000 / 50,000)
Direct Manufacturing labor $1.00 $1.00
($25,000 / 25,000) ($50,000 / 50,000)
Manufacturing overhead $11.48 $7.66
Manufacturing cost per unit $15.48 $11.66
3. Managers can use the new cost information for planning and cost reduction.
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