Question
Columbia Corporation manufactures two products: Tricycles and Wagons. The annual production budget expects total direct labor costs to equal $167,000. The company expects to spend
Columbia Corporation manufactures two products: Tricycles and Wagons. The annual production budget expects total direct labor costs to equal $167,000. The company expects to spend $60 in direct labor per tricyle for 1,950 tricycles and $20 in direct labor per wago for 2,200 wagons. The company is looking at the possibility of changing to an activity-based costing system for its products. If they company used an activity based costing system, it would have the following two activity cost pools:
Expected Activity | per unit | ||
Activity cost pool | Total Estimated OH Cost | Tricyle | Wagon |
Set up costs | $6,900 | 4 setups | 2 setups |
Assembly costs | $31,615 | 2.5 hrs | .5 hrs |
Total | $38,515 |
a. Calculate a single plant-wide predetermined OH rate based using direct labor dollars as the cost driver (round to two decimal places).
b. How much MOH will be applied to one tricycle using the plant-wide rate?
c. How much MOH will be applied to one wagon using the plant-wide rate?
d. Using the table above, calculate the activity-based OH rates for the two cost posts (round to two decimal places).
e. How much MOH will be applied to tricyles using the ABC rates?
f. How much MOH will be applied to wagons using the ABC rates?
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