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ed an Argos Carpets & Flooring is one of the largest flooring providers. For the fiscal 2019, it has budgeted overhead costs of $2,490,000. It
ed an Argos Carpets & Flooring is one of the largest flooring providers. For the fiscal 2019, it has budgeted overhead costs of $2,490,000. It has allocated overhead on a plantwide basis to its two products (vinyl flooring and laminate flooring) using direct labor hours which are estimated to be 830,000 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 $1,015,000 and $1,134,000 is allocated to the Design cost pool. Additional information related to these pools is as follows. Machine Number hours of setups Vinyl Flooring 175,000 950 Laminate 175,000 2,200 Flooring Total 350,000 3,150 Instructions (a) Determine the amount of overhead allocated to the vinyl product line and the laminate product line using activity-based costing. (5 marks) (b) What is the difference between the allocation of overhead to the vinyl and laminate product lines using activity-based costing versus the traditional approach, assuming direct labor hours were incurred evenly between the vinyl and laminate? (6 marks)
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