CH 26-3

INSTRUCTIONS

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 follow:

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.* **

2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1).* **

	Complete the Activity Tables for snowboards and skis.
	3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.*
	4. Determine the total and per-unit cost assigned to each product under activity-based costing.*
	5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.

* If required, round your answers to two decimal places.

** Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Amount Descriptions
Cutting Department
Finishing Department
Production Control
Materials Handling
Setups
Skis
Snowboards

FACTORY OH RATES

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. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

FACTORY OH COSTS

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. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

ACT TABLE SNOWBOARDS

Complete the Activity Tables for snowboards and skis.

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

ACT TABLE SKIS

Complete the Activity Table for skis.

	3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.*
	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. FINAL 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. Check all that apply. ( ) The activity-based method separately accounts for the production control and materials handling activity costs, decreasing cost distortion. ( ) Snowboards have fewer production control and number of moves than do skis, so skis have higher activity costs per unit. ( ) The multiple production department factory overhead rate method distorts the unit costs. ( ) The activity-based overhead allocation reveals that snowboards are more costly on a per-unit basis than are the skis.

1Indirect labor 2 Cutting Department 3 Finishing Department 4 Total 507000.00 156,000.00 192,000.00 855,000.00