Mountaineer Tents Manufactures and Sells Heavy and Light Duty Tents

Essay

Mountaineer Tents manufactures and sells heavy and light duty tents to various outdoor retailers.To better estimate costs,the company recently adopted an activity-based costing system.Last year,the company incurred $900 000 in overhead costs.Based on an intense study of their company,the following activities,allocation bases,and percentages of overhead costs were determined:
$\begin{array}{llc}\text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead cost } \\\hline \text { Purchasing } & \text { Number of purchase orders } & 55 \% \\\text { Inspections } & \text { Number of inspections } & 20 \% \\\text { Sales } & \text { Numher of sales nrders } & 25 \%\end{array}$

The number of activities for heavy and light duty tents is as follows:
$\begin{array}{lrr}& \underline{\text { Heavy-duty}}&\underline{\text { Light-duty}}\\\text { Number of purchase orders } & 5000 & 4000 \\\text { Number of inspections } & 3000 & 1000 \\\text { Number of sales nrders } & 800 & 400\end{array}$
Required:
A. Calculate the tatal cverhead that should be allacated to each of the three actrities.
B. Calculate the averhead rates for each of the three activities.
C. If a single sales arder requires 10 purchase arders and 30 inspections to fill how much cverhead should be agplied to the order?