1.

2.

EcoFabrics has budgeted overhead costs of $992,250. It has assigned overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 472,500 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Total estimated machine hours is 210,000 , and total estimated number of setups is 1,575 . Overhead allocated to the cutting cost pool is $378,000 and $614,250 is allocated to the design cost pool. Additional information related to product usage by these pools is as follows. (a1) Calculate the overhead rate using activity based costing. (Round per machine hour to 2 decimal places, e.g. 12.25.) Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs. Compute the activity-based overhead rates for these three cost pools