Activity-Based Costing: The Pinaforie Company used the following four cost pools in calculation overhead allocations for its Osowhatso Production during December:
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Activity Cost Pool
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Activity Measure
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Activity Rate
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Set-Up Costs
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Batches Run
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$1,200 per batch
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Depreciation
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Machine Hours
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$10 per machine hour
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Electric Costs
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Kilowatt Hours
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$20 per kilowatt hour
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Quality Control
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Inspection hours
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$40 per inspection hour
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December production resulted in 12,400 Osowhatso's produced. It took 9,500 hours of machine time, requiring 200 batches of production, 3,000 kilowatt hours of electricity were used and 1,600 hours of inspection time were required for quality control.
Required:
Compute the overhead cost for its Osowhatso Production during December using activity-based costing methods.
Compute the overhead cost for its Osowhatso Production during December if they just used one cost rate (the "traditional method"). The single-based cost allocation would be based on estimated total overhead costs of $450,000 and a rate based on machine hours, which were estimated to be 9,000 machine hours.