Jones Manufacturing Company Makes Two Products Required:

A

Jones Manufacturing Company makes two products.The company's budget includes $500,000 of overhead.In the past,the company allocated overhead based on estimated total direct labor hours of 20,000.Jones recently implemented an activity-based costing system and had determined that overhead can be broken into three overhead pools: processed purchase orders,machine setups,and good shipped.The following is a summary of company information:
$$\begin{array}{lrll} & \underline{\textbf {Estimated Cost}} && \underline{\textbf {Estimated Activities}} \\\text {Orders processed} & \$ 75,000 && 5,000 \text { orders} \\\text {Machine setups} & 12,000 && 500 \text { machine hours} \\\text {Shipping} & \underline{30,000} && 60,000 \text { shipments} \\& \underline{\underline{\$117,000}} && \\\end{array}$$
Required:

a. Calculate the company’s overhead rate based on total direct hours.

b. Calculate the company’s overhead rates using the activity-based costing pools.