department rates, and activity$-$based costing

Loudspeakers,

$$465,430$ and $$66\mathrm{.}49$

Big Sound Inc. manufactures two products: receivers and loudspeakers. 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:

Instructions

Determine a plantwide overhead rate based upon direct labor hours.

Determine the total and per$-$unit factory overhead costs allocated to each product, using the

plantwide overhead rate in $(1).$

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 fac$-$

tory overhead is $$420,000$ and $$294,000$ for the Subassembly and Final Assembly departments,

respectively.

Determine the total and per$-$unit factory overhead costs allocated to each product, using the

multiple production department overhead rates in $(3).$

Determine the activity rates, assuming that the indirect labor is associated with activities rather

than with the production departments.

Determine the total and per$-$unit cost assigned to each product under activity$-$based costing.

Explain the differences in the per$-$unit overhead allocated to each product using the

single plantwide factory overhead rate method, the multiple production department factory

overhead rate method, and activity$-$based costing.