Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool }&\text { Cost Driver }&\text { Est Overhead }&\text { Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is
A)$1.20 per direct labor hour.
B)$240 per order.
C)$0.12 per part.
D)$6,834 per order.

Question

Quizplus · Accepted Answer

The overhead application rate for ordering and receiving is $240 per order. This is calculated by dividing the estimated overhead cost for ordering and receiving ($120,000) by the estimated number of orders (500).

Tidwell Industries Has the Following Overhead Costs and Cost Drivers