Chapter 5: ABC Answer cells Quinnipiac Padfolio Club makes two products (Padfolios and Business Cards) for students to use during interview season. The company has two production departments (Forming and Assembly) and operates at capacity. The controller has asked you to compare plant-wide, department, and activity-based cost allocation. Direct Material and Direct Labor is incurred in both production departments (Forming & Assembly) and is directly traced to the two product lines (Padfolios & Business Cards). There are also two types of overhead (Setup & Supervision) incurred in the departments. Overhead costs need to be allocated to the two product lines so the Quinnipiac Padfolio Club can calculate the costs of each product line. Budgeted information for the year ended December 31, 2017 is as follows: Total $ $ Padfolios Business Cards 25,000 $ 24,000 $ 41,000 $ 17,000 $ 49,000 58,000 Forming Department Direct Materials Direct Manufacturing Labor Overhead Costs Setup Supervision $ $ 22,500 20,500 $ $ Padfolios Business Cards 4,500 $ 20,000 $ 17,500 $ 22,000 $ Total 24,500 39,500 Assembly Department Direct Materials Direct Manufacturing Labor Overhead Costs Setup Supervision $ $ 50,000 24,000 Other information about the departments' activities follows: Setup costs in each department vary with the number of batches processed in each department. The budgeted number of batches for each product line in each department is as follows: Padfolios Business Cards Total Setup Batches Forming Department Assembly Department 120 28 43 148 133 90 Supervision Costs: Vary with direct manufacturing labor costs in each department. 1 Calculate the total budgeted cost of each product line (Padfolios vs. Business Cards) based on a single plant-wide overhead rate, if total overhead is allocated based on total direct costs. (Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on a single overhead allocation rate.) OH Pool Description OH Pool Amount Budgeted Overhead Rate OH Rate 1 Alloc Base Amount Allocation Rate Alloc Base Description Total Costs Assigned Padfolios Business Cards Total Total Direct Costs Total Overhead Costs Total Manufacturing Costs mi Calculate the budgeted cost of each product line (Padfolios vs. Business Cards) if Quinnipiac Padfolio Club allocates ove costs in each department using activity-based costing. (i.e. Each type of overhead in each department is allocated using relevant activity in the department.) (Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products bas four overhead allocation rates -- one for each activity.) OH Pool Description OH Pool Amount Alloc Base Amount Allocation Rate Alloc Base Description Budgeted Overhead Rate OH Rate 1 OH Rate 2 OH Rate 3 OH Rate 4 Total Costs Assigned Padfolios Business Cards Total Total Direct Costs Calculate the budgeted cost of each product line (Padfolios vs. Business Cards) if Quinnipiac Padfolio Club allocates overhead costs in each department using activity-based costing. (i.e. Each type of overhead in each department is allocated using the relevant activity in the department.) (Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on four overhead allocation rates -- one for each activity.) OH Pool Description OH Pool Amount Alloc Base Amount Allocation Rate Alloc Base Description Budgeted Overhead Rate OH Rate 1 OH Rate 2 OH Rate 3 OH Rate 4 Total Costs Assigned Padfolios Business Cards Total Total Direct Costs Total Overhead Costs Total Manufacturing Costs
