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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	$900,000
Other overheard	$3,600,000

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	12,000			3,000
Oven hours	3,000			21,000

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	$fill in the blank 1 per setup hour
b. Other overhead	$fill in the blank 2 per oven hour

2. How much total overhead is assigned to Fudge using ABC? $fill in the blank 3

3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $fill in the blank 4per unit

4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent. $fill in the blank 5 per oven hour

5. How much total overhead is assigned to Fudge using the plantwide overhead rate? $fill in the blank 6

6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non-ABC system because

different treatment of setup costs.difference in the units produced.difference in the sale prices of the products.different oven temperatures required for baking fudge and cookies.

.

6b. What is the difference in total overhead assigned to fudge under the two methods?

$fill in the blank 8

SEcond Question:

Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients:

		Patient Category
	Driver	Normal	Intensive	Activity Rate
Treating patients	Treatments	6,400	10,000	$4.00
Providing hygienic care	Hygienic hours	5,800	18,600	5.00
Responding to requests	Requests	32,000	80,000	2.00
Monitoring patients	Monitoring hours	6,000	72,000	3.00

Required:

1. Determine the total nursing costs assigned to each patient category.

	Costs Assigned
Normal	$fill in the blank 1
Intensive	$fill in the blank 2

2. Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient. Round your answers to the nearest

Normal	$fill in the blank 3 per patient day
Intensive	$fill in the blank 4 per patient day

3. Conceptual Connection: The supervisor of the surgical ward has suggested that patient days is the only driver needed to assign nursing costs to each type of patient. Calculate the charge per patient day using this approach. Round your answer to the nearest cent. $fill in the blank 5 per patient day