Allocating Batch-Level and Product Line Manufacturing Overhead Costs Sundance Skis Company is preparing its end-of-year gross margin computations. Sundance Skis manufactures three types of products: skis, snowboards, and snow skates. The following information, as of the end of the year, is available for these products:

Total manufacturing overhead is $1,125,000, with $506,250 related to batch-level activities and $618,750 related to product line activities.
1. In the past, Sundance Skis has allocated manufacturing overhead based on the number of units produced. Prepare gross margin calculations for Sundance Skis’ three divisions allocating manufacturing overhead according to the number of units produced.
2. After investigation, management at Sundance Skis determined that a more accurate allocation of manufacturing overhead would be to assign these costs using batch-level and product line activities. Prepare gross margin calculations for Sundance Skis’ three divisions by assigning manufacturing overhead using batch-level and product line activities.
Assume that the number of setups is the activity allocation basis for assigning costs of batch-level activities and that the number of product styles is the allocation base for assigning costs of product line activities.

Transcribed Image Text:

Skis Snowboards Snow Skates Total sales revenue Units produced Direct materials Direct labor.. $1,250,000 $1,500,000 $750,000 4,500 $(625,000) 3,750 6,750 $(500,000) $(125,000) $(125,000) $(250,000) $(375,000) Number of setups 9 18 3 Number of product styles 5 7 3