Question
EcoFabrics has budgeted overhead costs of $1,143,450. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor
EcoFabrics has budgeted overhead costs of $1,143,450. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 544,500 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $435,600 and $707,850 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool | Cotton | Total | ||||
---|---|---|---|---|---|---|
Machine hours | 121,000 | 121,000 | 242,000 | |||
Number of setups | 1,210 | 605 | 1,815 |
Part 1
Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.)
Overhead rates for activity-based costing | |||
---|---|---|---|
Cutting | $enter a dollar amount per machine hour rounded to 2 decimal places | per machine hour | |
Design | $enter a dollar amount per setup rounded to 2 decimal places | per setup |
eTextbook and Media
Part 2
Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.
Wool product line | Cotton product line | |||
---|---|---|---|---|
Overhead Allocated | $enter a dollar amount | $enter a dollar amount |
eTextbook and Media
Part 3
Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.)
Overhead rates using the traditional approach | $enter a dollar amount per direct labor hour rounded to 2 decimal places | per direct labor hour |
eTextbook and Media
Part 4
What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?
Wool product line | Cotton product line | |||
---|---|---|---|---|
Overhead Allocated | $enter a dollar amount | $enter a dollar amount |
Step by Step Solution
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