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1. Hayward Industries manufactures dining chairs and tables. The controller currently uses traditional costing to allocate overhead to the two product lines based on
1. Hayward Industries manufactures dining chairs and tables. The controller currently uses traditional costing to allocate overhead to the two product lines based on direct labor hours. However, he has asked you to do some analysis to determine how much overhead would be assigned to each product line if an activity-based costing system was used instead. The following information is provided: Activity Cost Driver Cost Pools Estimated Total Expected Expected use Expected use Overhead Use of Cost Drivers per Activity of Cost Drivers for Dining of Cost Drivers for Tables Machine Setups # of Setups $75,000 500 setups Chairs 150 setups 350 setups Inspections # of Inspections Total Overhead $110,000 $185,000 800 inspections 270 inspections 530 inspections Additionally, the company estimates that 2,200 direct labor hours for Dining Chairs and 2,800 direct labor hours for Tables (5,000 direct labor hours total) will be worked during the year. Instructions: Perform the following analyses to determine the overhead allocation amounts for each product using traditional costing and activity based costing. a. Using Traditional Costing, compute the total overhead costs assigned to each product line using a single overhead rate based on direct labor hours. b. Using Activity Based Costing, compute the total overhead cost assigned to each product line. OH Rate per Machine Set up: Overhead Applied to Dining Chairs: Overhead Applied to Tables: OH Rate per Inspection:,
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