Activity-Based and Department Rate Product Costing and Product Cost Distortions

Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:

The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:

The activity-base usage quantities and units produced for the two products are shown below.

Required:

1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. If required, round your answers to two decimal places.

Department	Production Department Rate
Cutting Department	$ per direct labor hour
Finishing Department	$ per direct labor hour

2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). If required, round your answers to two decimal places.

Product	Total Factory Overhead	Factory Overhead Per Unit
Snowboards	$	$
Skis	$	$

3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.

Activity	Activity Rate
Production Control	$ per prod. run
Materials Handling	$ per move
Cutting Department	$ per direct labor hour
Finishing Department	$ per direct labor hour

4. Determine the total and per-unit cost assigned to each product under activity-based costing. If required, round your answers to two decimal places.

Product	Total Activity Cost	Activity Cost Per Unit
Snowboards	$	$
Skis	$	$