Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc manufactures two products: receivert and loudspeakers. The factory overhead incurred is as follows: Indirect labor Subassembly Department Final Assembly Department Total $400,400 196,800 114,000 $714,000 The activity bate antociated with the two production departments is direct labor hours. The Indirect labor can be assigned to two different activities as follows: Budgeted Activity Cost $138,600 Activity Setup Quality control Total Activity Base Number of setups Number of inspections 261,800 $400,400 The activity-base usage quantities and units produced for the two products follow: Number of Setups Direct Labor Hours- Subassembly 875 Number of Inspections 450 Direct Labor Hours--Final Assembly Units Produced 525 Receivers 80 7,000 7.000 875 Loudspeakers 320 525 1,750 14,000 400 1,400 2,200 1,400 Total 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirector sociated with the production departments, the totalteter overheads $420,000 and $294,000 for the Subassembly and embly departments, rectively Department Production Department Rate subassembly Department per direct labor hour Final Assembly Department per direct Inboe hour 2. Determine the total and per unit factory overhead costs located to each product, ufing the multe production department when tabet in (t). Round per unit amounts to the nearest whole cent Product Total Factory Overhead Factory Overhead Per Unit Receivers Loudspeakers 3. Determine the activity rates, assuming that the Indirect labor is associated with activities rather than with the production departments, Round per unit amounts to the nearest whole cent. Activity Activity Rate Setup per setup Quality Control 5 per inspection Subassembly Department per direct labor hour Final Assembly Department per direct labor hour 4. Determine the total and per-unit cost assigned to each product under activity based costing. Round the per unit amounts to the nearest whole cont Product Total Activity Cost Activity Cost Per Unit Receivers Loudspeakers 5. Comment on the difference in the per unit overhead allocated to each product under the multiple production department factory overhead rats and activity and conting me The activity based overhead allocation reveals that loudspeakers are costly on perunit basis than are the receivers. The multiple production department at method armes that the per-unit factory overhead is for the two products. The multiple production department factory overhead rate method stort the unit cost because factory overheads assumed to be to direct labor hours Loudspeakers have setups and inspection activities than de recer. Thus, operare activity cost per unit than do receivers Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor $400,400 198,800 Subassembly Department Final Assembly Department 114,800 Total $714,000 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: Activity Budgeted Activity Cost $138,600 Setup Quality control Activity Base Number of setups Number of inspections 261,800 Total $400,400 The activity-base usage quantities and units produced for the two products follow: Number of Setups 80 Number of Inspections Direct Labor Hours Subassembly Direct Labor Hours Final Assembly Units Produced Receivers 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000
