Question
Adams Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs
Adams Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow:
Activities | ||||||||
Unit Level | Batch Level | Product Level | Facility Level | |||||
Cost | $ | 64,800 | $ | 19,110 | $ | 13,000 | $ | 192,000 |
Cost driver | 2,700 labor hrs. | 39 setups | Percentage of use | 16,000 units | ||||
Production of 710 sets of cutting shears, one of the companys 20 products, took 130 labor hours and 9 setups and consumed 10 percent of the product-sustaining activities.
Required
Had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears?
How much overhead is allocated to the cutting shears using activity-based costing?
Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 710 units are produced. If direct product costs are $110 and the product is priced at 35 percent above cost for what price would the product sell under each allocation system?
Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? How much overhead is allocated to the cutting shears using activity-based costing? (Round intermediate calculations to 2 decimal places. Round your final answers to the nearest whole dollar amount.)
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Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 710 units are produced. If direct product costs are $110 and the product is priced at 35 percent above cost for what price would the product sell under each allocation system? (Round intermediate calculations and final answers to 2 decimal places.)
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