Problem - Velshi Printers has contracts to complete weekly advertising 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:

Cost pool              Manufacturing overhead costs                 Activity level

Design changes           $ 120,000                                          300 design changes

Setups                          640,000                                           5,000 setups

Inspections                     80,000                                           8,000 inspections

Total manufacturing overhead costs      $840,000

During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

Activity               Money Managers               Hospital Systems

Pages                      60,000                                76,000

Design changes           10                                          0

Setups                        20                                        10

Inspections                  30                                        38

1) Using ABC, calculate the activity driver rate for each for each overhead activity.

2) Using ABC, calculate the total amount of overhead that will be allocated to each of the two customers given.

3) Using ABC, calculate the overhead cost per page for each of the two customers given.