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Chapter 4: Activity Based Costing and Analysis A. Plantwide Overhead Rate Method: Ex: Indirect Labor Cost Other Factory Overhead Total Factory Overhead $4,000,000 800,000 $4,800,000

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Chapter 4: Activity Based Costing and Analysis A. Plantwide Overhead Rate Method: Ex: Indirect Labor Cost Other Factory Overhead Total Factory Overhead $4,000,000 800,000 $4,800,000 Direct Labor Hour (DLH) Total Direct per Unit Labor Hours 15 75,000 25 25,000 # of Units 5,000 1,000 Plantwide Overhead Rate Total Overhead Cost Total Direct Labor Hour (DLH) Standard Go-Cart Custom Go-Cart Total Direct Labor Hours (DLH) 100,000 Indirect Labor Other Factory Overhead Overhead allocated to each product Plantwide Overhead Rate DLH per unit Total Overhead Cost Standard Go-Kart (15 DLH) $400 $350 Custom Go-Kart (25 DLH) $600 500 DM DL DM DL FO FO Product Cost per Unit using Plantwide Rate Direct Direct Factory Total Cost Material Labor Overhead Per Unit Standard Go-Cart $400 $350 ? .............? ?.............? Custom Go-Cart 600 500 ?...............? ?..............? Assets Expense 1 B.Deparmental Overhead Rate Method: Ex: Indirect Labor Cost Other Factory Overhead Total Factory Overhead $4,000,000 800,000 $4,800,000 Machining Department Assembly Department Total Factory Overhead: $4,200,000 600,000 $4,800,000 Machining Department Total Machine Hour (MH) per Unit Assembly Department Direct Total Direct Labor Labor Hour (DLH) Hour per Unit (DLH) Machine Hour (MH) # of Units Standard Go-Cart 5,000 10 50,000 MH 5 25,000 DLH Custom Go-Cart 1,000 20 5 5,000 DLH 20,000 70,000 MH Total Direct Labor Hours (DLH) 30,000 DLH Total Overhead Cost Total budgeted departmental overhead cost Departmental overhead rate = Total amount of departmental allocation base Machining Dept. Assembly Dept. Assembly department overhead rate = Standard Go-Kart ........MH) Standard Go-Kart DLH) FO FO Custom Go-Kart (........................ MH) Custom Go-Kart ........... .......... DLH) Machining department overhead cate = FO FO Product Cost per Unit using Plantwide Rate Direct Direct Factory Total Cost Material Labor Overhead Per Unit Standard Go-Cart $400 $350 ? ? ?.............? Custom Go-Cart 600 500 ? .? ?... ? Assets Expense 2

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