Noble Printers Has Contracts to Complete Weekly Supplements Required by Forty-Six

question 67

Essay

Noble Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2011,overhead cost estimates total $420,000 for an annual production capacity of 12 million pages.
For 2011 Noble Printers has decided to evaluate the use of additional cost pools.After analyzing overhead costs,it was determined that the number of design changes,setups,and inspections are the primary overhead cost drivers.The following information was gathered during the analysis.

During 2011,two customers,Wealth Managers and Health Systems,are expected to use the following printing services.

Required:
a. Calculate the cost driver rate if overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity.
b. Using the cost driver rate determined in (a),calculate the overhead cost estimate for Wealth Managers during 2011.
c. Assuming cost pools for design changes,setups,and inspections are used,calculate the cost driver rates for each of the three cost pools.
d. Using the cost driver rates determined in (c),calculate the overhead cost estimate for Wealth Managers during 2011.
e. Review the overhead costs estimates computed in (b)and (d).Discuss what conclusions can be drawn from this exercise in regard to the use of cost pools.

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Definitions:

Recency Effect

Tendency to remember information at the end of a body of information better than the information that precedes it.

Group Think

The behavior seen in groups when the urge for peace or uniformity brings about decisions that are improper or not functional.

Critical Evaluation

The process of examining an issue or object critically to form an opinion or judgment after considering its strengths and weaknesses.

Strong Leader

A person who exhibits confidence, integrity, and a clear vision, and who possesses the ability to inspire and motivate others.