Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs
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Question:
Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activitybased costing. The costs and cost drivers associated with the four overhead activity cost pools follow:
Activities
Unit Level Batch Level Product Level Facility Level
Cost $ $ $ $
Cost driver labor hours setups Percentage of use units
Production of sets of cutting shears, one of the companys products, took labor hours and setups and consumed percent of the productsustaining activities.
Required
Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears?
How much overhead is allocated to the cutting shears using activitybased costing?
Compute the overhead cost per unit for cutting shears first using activitybased costing and then using direct labor hours for allocation if units are produced. If direct product costs are $ and the product is priced at percent above cost for what price would the product sell under each allocation system?
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
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