Mastery Problem: Activity-Based Costing WooICOrp Woo|Corp 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 its method of assigning overhead to products. You've just been hired as a production manager at WooICorp. Currently WoolCorp makes two products: (I) raw, clean wool to be used as stufng or insulation and (2) wool yarn for use in the textile industry. The company wouid like you to evaluate its costing methods for its raw wool and wool yarn. Single Plantwide Rate WoolCorp is currently using the single plantwnde factory overhead rate method, which uses a predetermined overhead rate based on an estimated allocation base such as direct labor hours or machine hours. The rate is computed as follows: Singie Plantwide Factory Overhead Rate = iTotal Budgeted Factory Overhead) : (Total Budgeted Plantwide Ailocation Base) WooiCorp has been using combing machine hours as its allocation base. The company would like to consider activityvbased costing. In order to understand their current system better, you evaluate WoolCorp'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 450 pounds of either raw wool or wool yarn; Budgeted Factory Factory Overhead Type Overhead Sorting $25,600 Cleaning 38,400 Comblng 1,200 new wool Wool Yarn Hours of combing machine use required 30 20 In the following table, use combing machine hours as the allocation base for assigning overhead costs to each product. When required, round your answers to the nearest dolli Single Plantwide Factory Overhead Rate: 34 per combing how Raw Wool Wool Yarn Allocated factory overhead cost $ $ Feedback Check MyWork Review the single plantwide factory overhead rate method, and allocate the costs using a single plantwide factory overhead rate and the combing hours used by each product. 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 ra wool and wool yarn. Type of Cost Activity Base Total Cost Sorting Hours of sorting $25,600 Cleaning Units of cleaning machine power 38,400 Combing Hours of combing machine use 1,200 Raw Wool Wool Yarn Hours of sorting required 800 3,200 Units of cleaning machine power required 1,920 4,480 Hours of combing machine use required 30 20 In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent. 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 required, round your answer: to HIE nearest dollar. Raw Wool Wool Yarn Sorting cost $ $ Cleaning cost Combing cost Total cost $ $ Check My Work Review the activity-based costing method and allocate the costs using the rate computed for each activity. Final Question After reviewing your work on the Single Plantwide Rate and Activity-Based Costing panels, which of the costing method would you recommend to WoolCorp, and why? Activity-based costing method, because it recognizes differences in how each product uses factory overhead activities, yielding more accurate product costs. - Feedback Check My Work Review the data you've compiled, and think about which method would provide more accurate product costs. Feedback Check My Work Partially correct