Baldwin Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2011, manufacturing overhead cost estimates total $1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin 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 2011, two customers, Wellington Drugs and Home Again, 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 Wellington Drugs during 2011?
A)$5,400
B)$9,100
C)$10,800
D)$10,192

Question

Baldwin Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2011, manufacturing overhead cost estimates total $1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin 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 2011, two customers, Wellington Drugs and Home Again, 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 Wellington Drugs during 2011?
A)$5,400 
B)$9,100 
C)$10,800 
D)$10,192

Quizplus · Accepted Answer

To calculate the manufacturing overhead cost estimate for Wellington Drugs, we need to use the cost driver rates for design changes, setups, and inspections. 
For design changes: $800 per design change x 12 design changes = $9,600
For setups: $600 per setup x 4 setups = $2,400
For inspections: $200 per inspection x 50 inspections = $10,000

Total manufacturing overhead cost estimate for Wellington Drugs is $9,600 + $2,400 + $10,000 = $22,000
Using the percentage of pages produced by Wellington Drugs out of the total pages produced, we can allocate the manufacturing overhead costs to Wellington Drugs.
Wellington Drugs pages = 600,000
Total pages = 20,000,000
Percentage of pages produced by Wellington Drugs = 3%
Manufacturing overhead cost allocated to Wellington Drugs = $22,000 x 3% = $660
Therefore, the total manufacturing overhead cost estimate for Wellington Drugs during 2011 is $5,400.

Baldwin Printers Has Contracts to Complete Weekly Supplements Required by Forty-Two