Allocate overhead using a single plantwide rate, multiple department rates, and activity-based costing Downhill 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 follow: Required: 1. Determine a single plantwide factory overhead rate based upon direct labor hours. Direct labor overhead rate: $ per direct labor hour 2. Determine the total and per-unit factory overhead costs allocated to each product, using the plantwide overhead rate in (1). Round per unit amounts to the nearest whole cent. 3. 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 $435,000 and $735,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. 4. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (3). Round per unit amounts to the nearest whole cent. 5. 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. 6. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. 7. Comment on the differences in the per-unit overhead allocated to each product using the single plantwide factory overhead rate method, the multiple production department factory overhead rate method, and activity-based costing. The plantwide overhead method allocates $ of overhead to each product, while the multiple production department method allocates $ overhead to snowboards and $ to skis. Both the plantwide and multiple production department method: distort the allocation of overhead because they account for how each product consumes overhead. In contrast, activity-based costing allocates \$ of factory overhead to snowboards and \$ to skis. Activitybased costing accurately allocates factory overhead because for how each product consumes overhead. Snowboards consume direct labor hours in the Finishing Department, which has overhead. In addition, snowboards consume production control and materials handling overhead than do skis. This is because snowboards are made in lots, representing a variety of styles. Thus, snowboards have activity costs than skis
