Question
Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up
Comparing ABC and Plantwide Overhead Cost Assignments
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
Setting up equipment | $420,000 |
Other overheard | $5,208,000 |
Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
Fudge | Cookies | ||||
Units produced | 8,000 | 445,000 | |||
Setup hours | 5,600 | 1,400 | |||
Oven hours | 4,200 | 29,400 |
Required:
Round your answers to the nearest whole dollar, unless otherwise directed.
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
a. Setting up equipment | $ per setup hour |
b. Other overhead | $ per oven hour |
2. How much total overhead is assigned to Fudge using ABC? $
3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent. $ per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate? $
6a. The difference in the total overhead assigned to Fudge is different under the ABC system and nonABC system because different treatment of setup costs. .
6b. What is the difference in total overhead assigned to fudge under the two methods?
$
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