Answer the following questions using the information below:
Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

-Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2010?
A)$13,700
B)$6,500
C)$6,860
D)$10,192

Question

Answer the following questions using the information below:
Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
  During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
 
-Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2010?
A)$13,700 
B)$6,500 
C)$6,860 
D)$10,192

Quizplus · Accepted Answer

To allocate the manufacturing overhead costs, we need the cost driver rates for each cost pool. Based on the given information, we can calculate the rates as follows:
- Design changes: $420,000 ÷ 600 changes = $700 per change
- Setups: $280,000 ÷ 400 setups = $700 per setup
- Inspections: $140,000 ÷ 800 inspections = $175 per inspection

For Money Managers, the total number of design changes, setups, and inspections are:
- Design changes: 2 changes
- Setups: 2 setups
- Inspections: 20 inspections

So, the total manufacturing overhead cost estimate for Money Managers using the three cost pools is:
- Design changes: 2 changes × $700 per change = $1,400
- Setups: 2 setups × $700 per setup = $1,400
- Inspections: 20 inspections × $175 per inspection = $3,500
Total = $1,400 + $1,400 + $3,500 = $6,300
Adding the direct labor cost of $560, we get:
Total manufacturing cost estimate = $6,860

Therefore, the answer is C) $6,860

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