Task: Fribourg Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $89,000 were incurred. An analysis of overhead costs reveals the following activities.
| Activity |
Cost Driver |
Total Cost |
| 1. Materials handling |
Number of requisitions |
$ 35,000 |
| 2. Machine setups |
Number of setups |
27,000 |
| 3. Quality Insoections |
Number of Inspections |
27,000 |
| Cost Driver |
Instruments |
Gauges |
Total |
| Number of requisitions |
400 |
600 |
1,000 |
| Number of setups |
200 |
300 |
500 |
| Number of Inspections |
200 |
400 |
600 |
Instructions:
a. Determine the overhead rate for each activity.
Number of requisitions 35.00
Number of setups 54.00
Number of Inspections 45.00
b. Assign the manufacturing overhead costs for April to the two products using activity-based costing.
Instruments Gauges
Number of requisitions 14,000 21,000
Number of setups 10,800 16,200
Number of Inspections 9,000 18,000
c. Write a memorandum to the president of Fribourg Instrument explaining the benefits of activity-based costing.