35. (Activity-based costing) Williams Components Company manufactures two products. Following is a production and cost analysis for each product for the year 2000.

Roberto Lopez, the firm’s cost accountant, has just returned from a seminar on activity-based costing. To apply the concepts he has learned, he decides to analyze the costs incurred for Products A and B from an activity basis. In doing so, he specifies the following first and second allocation processes:
FIRST STAGE: ALLOCATIONS TO DEPARTMENTS Cost Pool Cost Object Activity Allocation Base Power Departments Kilowatt-hours Purchasing Materials Number of purchase orders Building occupancy Departments Square feet occupied SECOND STAGE: ALLOCATIONS TO PRODUCTS Cost Pool Cost Object Activity Allocation Base Departments:
Indirect labor Products Hours worked Power Products Machine hours Machinery-related Products Machine hours Building occupancy Products Machine hours Materials:
Purchasing Products Materials used

a. Determine the total overhead for Williams Components Company.

b. Determine the plantwide overhead rate for the company, assuming the use of direct labor hours.

c. Determine the cost per unit of Product A and Product B, using the overhead application rate found in part (b).

d. Using the step-down approach, determine the cost allocations to departments (first-stage allocations). Allocate in the following order: building occupancy, purchasing, and power.

e. Using the allocations found in part (d), determine the cost allocations to products (second-stage allocations).

f. Determine the cost per unit of Product A and Product B using the overhead allocations found in part (e).

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Cost Component Product A Product B Products Cost Units produced 10,000 10,000 20,000 Raw materials used (units) 50,000 50,000 100,000 $ 800,000 Y 100,000 100,000 $ 200,000 Labor hours used Department 1: $ 681,000 Direct labor ($375,000) 20,000 5,000 25,000 Indirect labor Inspection 2,500 2,500 5,000 Machine operations 5,000 10,000 15,000 Setups 200 200 400 Department 2: $ 462,000 Direct labor ($200,000) 5,000 5,000 10,000 Indirect labor Inspection 2,500 5,000 7,500 Machine operations 1,000 4,000 5,000 Setups 200 400 600 Machine hours used Department 1 5,000 10,000 15,000 $ 400,000 Department 2 5,000 20,000 25,000 $ 800,000 Power used (kw-hours) $ 400,000 Department 1 Department 2 1,500,000 8,500,000 Other activity data: Building occupancy $1,000,000 Purchasing $ 100,000 Number of purchase orders Material X Material Y Square feet occupied Purchasing Power Department 1 Department 2 200 300 10,000 40,000 200,000 250,000