Mastery Problem: Activity-Based Costing WooCorp WooCorp buys sheep's wool from farmers. The company began operations in January of this year, and is making decisions on product offerings pricing and vendors. The company is also examining of assigning overhead to products. You've just been hired as a production manager at WoolCorp. method Currently WooCorp makes two products: (1) raw, clean wool to be used as stuffing or insulation and (2) wool yarn for use in the textile industry The company would you to evaluate its costing methods for its raw wool and wool yarn Single Plantwide Rate WooCorp is currently using the single plan wide factory overhead rate method, which uses a predetermined overhead rate based on an estimated location base such as direct labor hours or machine hours. The rate is computed as follows Single Pantwide Factory Overhead Rate (TO Budgeted Factory Overhead) (Total Budgeted Plantwide Allocation Base) WooCorp has been using combing machine hours at allocation base The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WooCorp's current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 550 pounds of the row wool or wool yarn Factory Overhead Type Budgeted Factory Overhead Sorting Cleaning Combing $25,600 38,400 Raw Wool Wool Yarn Hours of combing machine use required 80 In the following table, use combing machine hours as the allocation base for assigning overhead costs to each product. When required, round Single Pantwide Factory Overhead Rates per combing hour Wool Yarn Allocated factory overhead cost Activity-Based Costing Ther e W m 's current method with activity.hacer contine Interview the turtin Check My Work Previous Next > Calculator Activity-Based Costing In order to compare WoolCorp's current method with activity-based costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn. Type of Cost Activity Base Total Cost $25.600 Sorting Cleaning Hours of sorting Units of cleaning machine power Hours of combing machine use 38,400 Combing 1.400 Raw Wool Wool Yarn 3,200 1,920 4,480 Hours of sorting required Units of cleaning machine power required Hours of combing machine use required 800 30 In the following table, compute and enter the activity rate for each of the three activities. If require Activity Activity Rate Sorting per sorting hour Cleaning per unit of cleaning machine power Combing per hour of combing machine use In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product's process. When requir Raw Wool Sorting cost Cleaning cost Combing cost Total cost Final Question After reviewing your work on the Single Plantwide Rate and Activity-Based Costing panels, which of the costing method would yo Previous Next >
