Carmeli Instrument Inc. manufactures two products: missile range instruments and space pressure gauges. During January, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $81,000 were incurred. An analysis of overhead costs reveals the following activities.
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The cost driver volume for each product was as follows.
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Instructions
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for January to the two products using activity based costing.
(c) Write a memo to the president of Carmeli Instrument, explaining the benefits of activity basedcosting.