write a memorandum to the president of major instrument explaining the benefits of a 608874

Major 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 $94,500 were estimated. An analysis of estimated overhead costs reveals the following activities.

Activities

Cost Drivers

Total Cost

1. Materials handling

Number of requisitions

$40,000

2. Machine setups

Number of setups

27,500

3. Quality inspections

Number of inspections

27,000

$94,500

The cost driver volume for each product was as follows.

Cost Drivers

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.

(b)Assign the manufacturing overhead costs for April to the two products using activity-based costing.

(c)Write a memorandum to the president of Major Instrument explaining the benefits of activity-based costing.