Question

1. Milton Manufacturing has three departments (or activities) in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $80,000, 162,500, and $28,000, respectively. The expected annual use for each activity is 1,000 setups, 12,500 machine hours, and 875 inspections Compute the overhead rate for each activity Machine Setups Machinin Inspections 2. Wilson Bradley & Associates, a law firm, uses Activity Based Costing for assigning overhead costs. The following budgeted data for each of the activity cost pools is provided for the year 2016. Estimated Overhead $36,800 1,797,600 448,000 $2,282,400 Expected Use of Researching legal issues Meeting with clients Preparing legal documents 800 research hours 8,400 professional hours 28,000 pages During 2017 the firm experienced actual cost driver use as follows: 820 research hours, 8,550 professional hours, and prepared 27,600 document pages. a. Compute the total overhead applied during 2017 using ABC b. If actual overhead costs incurred during 2017 were $2,300,000 was overhead under- or overapplied during the year?

Answer 1