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Jackets Galore, Inc. presently uses the traditional costing method for allocating overhead for their 6 lines of seasonal coats. The company is considering moving to

Jackets Galore, Inc. presently uses the traditional costing method for allocating overhead for their 6 lines of seasonal coats. The company is considering moving to an activity-based costing approach and provides the following information:

Activity Cost Pools

Estimated

ANNUAL

Product A

Product B

Overhead

Designing

$450,000

7,000

5,000

Sizing and cutting

$4,000,000

90,000

70,000

Stitching and trimming

$1,440,000

30,000

50,000

Wrapping and packing

$336,000

16,000

16,000

a) If the company allocated its overhead based on machine hours, what is the estimated overhead per machine hour?

$ per machine hour

b) If the company moves to an ABC approach, what would the overhead allocation be per activity cost pool?

Designing: $ per designer hour

Sizing and cutting: $ per machine hour

Stitching and trimming: $ per labour hour

Wrapping and packing: $ per finished unit

c) What would the overhead allocated under each method be based on actual activity in June?

Activity Cost Pools

Actual use of cost drivers per activity

Designing

900 designer hours

Sizing and cutting

10,000 machine hours

Stitching and trimming

7000 labour hours

Wrapping and packing

2500 finished units

Traditional $

Designing: $

Sizing and cutting: $

Stitching and trimming $

Wrapping and packing: $

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