Two-Stage ABC for Manufacturing (LO2)

Merlot Company has determined its activity cost pools and cost drivers to be the following:

Cost pools SSDs: oie Bc ae Ieee ane eee ices AAA tarred ts 2h 2 $ 56,000 MELEE INENRCLITM6 | c oro c.ecoscetes crons ranteh checires Aiba 3 radio aro tial oi noe c 12,800 WAACHINSLOMEALIO Mare cenys pore soa tte eveso :50 havo uence) eae owa eenane 240,000 IPEVONIING| Gane d Gc, oO ORMge Earb noo et d.O ot 60,000 OLAlinciFect MmanuractunrimGiCOStS: 5° fin. cies ecetetetslteneneetaeh $368,800 Cost drivers XELNUTO HS):5 , oi-che SNe ch SRE EAC Coma cornea res ceeitaraao adH eroic 350 WIALCHIGIIMONCS MET eiattrtre cone cperstaie c cress c.cle eee aisb ana uetermirands 640 MECTINEINGMRs > oR so De ee moe eo mab on 5 Hen On commo od dt 20,000 PRICE) CUCIIG. ia oved pre Wao OOn Oooo edo ono oats Hb tn x 1,200 One product made by Merlot, metal casements, used the following activities during the period to produce 500 units:

Required SOUS: ov kins og ud Reo ee Omens DRaooe mamtomioon ono ona 56 20 IMPEYEIMIMONES.. 6ic cin tp dS Orn Bacto ECE ROE MeeReA oo-de-croe cic cc 80

[MENGE IOUS A 5 dun o cecla iGo lerend el Cro OnoR Okan ineceora OG gato-c ots Gc 1,900

[PEYEINTAYS) CLC. a oo ods oO ma GUD OOo uo arom org 6 Abad c 150

a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company.

b. Calculate the manufacturing overhead cost per metal casement manufactured during the period.

Calculating Manufacturing Overhead Rates Glassman Company, accumulated the following data for 2012:
Milling Department manufacturing overhead. .......-.- 2-0 eee eee eee eee eee $344,000 Finishing Department manufacturing overhead. .... 11.6... eee eee eee eee $120,000 Machine hours used MillinouDemartinemtmrreore-beemeet rs tet le.- Glcnersuelcole-a-aehaeielaun ee hen aes Reteton ree 10,000 hours lms ine} (DYeyoreintineintes soo oc en penonuneosooaonocononer cos os oo hao UMN 2,000 hours Labor hours used NUMA BESEMIEIis oto den cose es ue Bo oroemeMrmac noo mums oso ano te at 1,000 hours [Flnvesatine) (B=) ofa tailanvelliies ot Guctas osiedn peeaine en Ineo mopeeneNOI income siniic omit De, 070 814% 1,000 hours Required

a. Calculate the plantwide manufacturing overhead rate using machine hours as the allocation base.

b. Calculate the plantwide manufacturing overhead rate using direct labor hours as the allocation base.

c. Calculate department overhead rates using machine hours in Milling and direct labor hours in Finishing as the allocation bases. .

d. Calculate department overhead rates using direct labor hours in Milling and machine hours in Finishing as the allocation bases.

e. Which of these allocation systems seems to be the most appropriate? Explain.