Question
Smithson, Inc. produces two types of gas grills: a family model and a deluxe model. Smithsons controller has decided to use a plantwide overhead rate
Smithson, Inc. produces two types of gas grills: a family model and a deluxe model. Smithsons controller has decided to use a plantwide overhead rate based on direct labor costs. The president of the company recently heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the companys operations:
Family Model | Deluxe Model | |||
Direct labor costs | $72,600 | $145,200 | ||
Machine hours | 2,000 | 2,000 | ||
Setup hours | 200 | 800 |
Total estimated overhead costs are $435,600. Overhead cost allocated to the machining activity cost pool is $261,360 and $174,240 is allocated to the machine setup activity cost pool.
Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 15.25.)
Overhead rate | $ 2 |
Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, eg. 15.25.) Overhead Rate Machining $ per hour Machine set up $ per hour
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