Answer:
The question is incomplete; the complete question is given below.
Cost Pool Cost Driver Estimated Cost Driver Estimated Overheads
Material Material requisition 250,000.00 $105,000.00
Machining Machine hours 360, 750 $432,900.00
Inspection Number of inspections 25,000.00 $15,750.00
Answer:
Overhead rate per activity :Material- $0.42, Machining-$1.2, Inspection-$6.3
Explanation:
Activity-based costing aims to achieve better product pricing than traditional absorption cost by charging overheads to the product cost more accurately.
Activity-based costing uses cost drivers to charge overheads to cost unit as against the use of of volume-based bases like labour hours, machine hours. Overheads are first traced to the activities responsible for them- the sum is called cost pool. Cost pools are then absorbed into the cost unit using cost driver rates
Cost pool- the sum of the total overheads associated with an activity. E.g <em>$105,000 material requisition overheads.</em>
Cost driver: A factor that causes a change in the cost pool. E.g
<em>250,000 material requisitions.</em>
Cost per driver: A specific overhead absorption rate computed for an activity. It is calculated as follows:
Cost per driver = Estimated activity overheads/Total number of cost drivers
The predetermined overhead rate for each activity is calculated as follow;
Material requisition= $105,000/250,000 requisitions= $0.42 per requisition
Machining = $432,900/360,750 machine hours = $1.2 per machine hour
Inspection= $15,750/ 25,000 inspections = $6.3 per inspection
