Question 5 Waterway has budgeted overhead costs of $1,181,250. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 562,500 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $450,000 and $731,250 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total 125,000 125,000 250,000 Machine hours Number of setups 1,250 625 1,875 Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.) Overhead rates for activity-based costing Cutting per machine hour $ Design per setup $ LINK TO TEXT LINK TO TEXT Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing. Wool product line Cotton product line Overhead Allocated $ $ LINK TO TEXT LINK TO TEXT Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach per direct labor hour LINK TO TEXT LINK TO TEXT What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton? Wool product line Cotton product line Overhead Allocated Question 6 Swifty, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 200 pressure gauges were produced, and overhead costs of $85,150 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities Cost Drivers Total Cost 1. Number of requisitions $33,495 2. Materials handling Machine setups Quality inspections Number of setups 27,645 3. Number of inspections 24,010 $85,150 The cost driver volume for each product was as follows. Instruments Gauges Total 385 630 1,015 Cost Drivers Number of requisitions Number of setups Number of inspections 185 300 485 260 230 490 Determine the overhead rate for each activity. Overhead Rate Materials handling per requisition Machine setups $ per setup Quality inspections per inspection LINK TO TEXT VIDEO: SIMILAR EXERCISE Assign the manufacturing overhead costs for April to the two products using activity-based costing. (Round per unit answers to 2 decimal places, e.g. 12.25.) Instruments Gauges Total cost assigned $ Overhead cost per Unit $ $ Question 7 Crane Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Crane accumulated the following data relative to those activity cost pools and cost drivers Annual Overhead Data Estimated Use of Cost Drivers per Product Estimated Use of Cost Product Product Drivers BC113 AD908 per Activity Estimated Overhead Activity Cost Pools Machine setup Cost Drivers Setups $14,000 35 20 15 Machining 72,000 4,800 1,000 3,800 Machine hours Orders Packing 22,500 450 100 350 Using the above data, do the following: Prepare a schedule showing the computations of the activity-based overhead rates per cost driver. Activity Cost Estimated Estimated Use of Cost Pools Overhead Drivers per Activity Machine setup setups Activity-Based Overhead Rates per setup $ Machining machine hours per machine hr. Packing orders per order $ $ LINK TO TEXT Prepare a schedule assigning each activity's overhead cost to the two products. Activity Cost Pools BC113 AD908 Estimated Use of Cost Activity-Based Cost Estimated Use of Cost Activity-Based Cost Drivers per Product Overhead Rates Assigned Drivers per Product Overhead Rates Assigned Machine setup Machining $ Packing $ Total assigned costs $
