Morgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $147,000, $409,600, and $99,000, respectively. The cost driver for each activity and the estimated annual usage are number of setups 2,100, machine hours 25,600, and number of inspections 1,800.Compute the overhead rate for each activity.

Instructions are below.

Explanation:

Giving the following information:

Estimated annual overhead costs:

Machine setup= $147,000

Machining= $409,600

Inspections= $99,000

number of setups 2,100

machine hours 25,600

number of inspections 1,800

To calculate the estimated overhead rate, we need to use the following formula for each activity:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machine setup:

Estimated manufacturing overhead rate= 147,000/2,100= $70 per setup

Machining:

Estimated manufacturing overhead rate= 409,600/25,600= $16 per machine hour

Inspections:

Estimated manufacturing overhead rate= 99,000/1,800= $55 per inspection

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