Question
Greenwave Outdoor Products manufactures camping and related equipment and currently offers three products tents, backpacks, and tarps). The company also has three manufacturing departments (cutting,
Greenwave Outdoor Products manufactures camping and related equipment and currently offers three products tents, backpacks, and tarps). The company also has three manufacturing departments (cutting, assembling, and sewing), and utilizes activity-based costing (ABC). The company had the following overhead (OH) costs during the most recent period: Presidents Salary $ 75,000 Utilities 42,000 Supervisor Salaries 58,000 Machine Maintenance 12,000 Custodial Services 18,000 Equipment Depreciation 28,000 Facility Rent 48,000 Advertising 9,000 Measured activities that are available for use as cost drivers include direct labor hours (DLHs), machine hours (MHs), square footage occupied, and machine setups. Of course, allocating evenly to cost objects (departments or products) is also allowable if appropriate. The Cutting Department occupies 2,800 square feet of facility space and, during the period, incurred 1,500 DLHs, required no machine setups, and required no machine hours (MHs). The Assembling Department occupies 1,200 square feet of facility space and, during the period, incurred 600 DLHs, required 46 machine setups, and required 18,000 MHs. The Sewing Department occupies 2,000 square feet of facility space and, during the period, incurred 800 DLHs, required 14 machine setups, and required 10,000 MHs. In the activity-based costing system, costs are allocated from department to products based exclusively on DLHs (for simplicity). Tents required 600 DLHs in Cutting, 200 DLHs in Assembling, and 450 DLHs in Sewing. Backpacks required 700 DLHs in Cutting, 400 DLHs in Assembling, and 150 DLHs in Sewing. Finally, Tarps required 200 DLHs in Cutting and 200 DLHs in Sewing (and no DLHs in Assembling). REQUIRED: 1) Compute the OH cost for each product using the single volume-based driver (DLHs) for all OH costs, rather than ABC. 2) Identify and explain appropriate cost drivers for each element of OH and then compute the allocated OH cost for each product using ABC (and the assorted predetermined overhead rates). 3) Draw a sketch showing how OH costs are allocated to products using ABC. What OH cost pools could maybe be combined to simplify the ABC process? I need to be answer clearly with all the calculation . thank you
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