QUESTION:

David Inc. manufactures bobblehead dolls of famous baseball players. These dolls are in high demand from fans.

The company currently uses a plantwide overhead rate in order to allocate overhead to each job. They use direct labour hours as their cost driver.

The following estimates are available for the upcoming year:

			Direct
	Overhead	Machine	Labour
	Costs	Hours	Hours
Molding	$ 240,000	40,000	15,000
Painting	$280,000	24,000	35,000
Total	$ 520,000	64,000	50,000

Management would like to explore the use of activity based costing. For molding, the company will use machine hours as the activity driver and for painting they will use direct labour hours as the activity driver.

Actual data for the past month is as follows:

			Actual
	Actual	Actual	Direct
	Overhead	Machine	Labour
	Costs	Hours	Hours
Molding	$24,000	3,500	1,150
Painting	$23,000	2,200	3,100
Total	$47,000	5,700	4,250

Using the above information answer the following questions.

What is the activity rate that would be used for molding?

What is the activity rate that would be used for painting?

What is the total overhead allocated to molding for the past month?

Is overhead under- or over-allocated for molding?

Enter A for under-allocated

Enter B for over-allocated

Enter the letters without additional spaces or punctuation.

By how much is the molding overhead under- or over-applied?

What is the total overhead allocated to painting for the past month?

Is overhead under- or over-allocated for painting?

Enter A for under-allocated

Enter B for over-allocated

Enter the letters without additional spaces or punctuation.

By how much is the painting overhead under- or over-applied?

If the company continued to use the plantwide rate, what is the total overhead allocated to production for the past month?

Is overhead under- or over-allocated for the month if they continued to use the plantwide overhead rate?

Enter A for under-allocated

Enter B for over-allocated

Enter the letters without additional spaces or punctuation.

By how much is the overhead under- or over-applied if the company continued to use the plantwide rate?