Question
Sheffield has budgeted overhead costs of $1,171,800. It has allocated overhead on a plant wide basis to its two products (wool and cotton) using direct
Sheffield has budgeted overhead costs of $1,171,800. It has allocated overhead on a plant wide basis to its two products (wool and cotton) using direct labor hours which are estimated to be558,000for 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 $446,400and $725,400is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool Cotton Total
Machine hours 124,000 124,000 248,000
Number of setups 1,240 620 1,860
Calculate the overhead rate using activity based costing.(Round answers to 2 decimal places, e.g. 12.25.)
Overhead rates for activity-based costing
Cutting$ per machine hour
Design$ per setup
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 $ $
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
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 $ $
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