PR 18-3A Activity-based and department rate product costing and product cost distortions Obj. 3, 4 Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: EXCEL TENPLATE Indirect labor Cutting Department Finishing Department Total 5507.000 156,000 192,000 5855,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Production control Materials handling Total Budgeted Activity Cost 5237,000 270,000 $507.000 Activity Base Number of production runs Number of moves The activity-base usage quantities and units produced for the two products follow: Number of Production Runs 430 70 500 Number of Moves 5.000 2.500 Snowboards Skis Total Direct Labor Hours-Cutting 4,000 2,000 6,000 Direct Labor Hours --Finishing 2.000 4,000 6,000 Units Produced 6,000 6,000 12.000 2500 Instructions 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Answer Check Figure: Snowboards, $390,000 and $65 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. 4. Determine the total and per-unit cost assigned to each product under activity-based costing. 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods