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Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended
Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data: Cost Driver Volume Activity Cost Driver Cost Pencils Pens Setting up Number of setups $ 99.000 17 28 Inspecting Number of parts 25 200 6 Packing and shipping Number of boxes shipped 75.000 50.000 75.000 Total overhead $199 200 3 Required: a. Compute the amount of overhead to be allocated to each product under activity-based costing. (Do not round intermediate calculations.) Overhead Pencils Pens b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 50,000 boxes of pencils and 75,000 boxes of pens were produced during the period. (Do not round intermediate calculations.) Overhead Pencils Pens
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