Question
Spiro Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs
Spiro Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based 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 | $48,000 | $19,600 | $11,000 | $285,000 | ||
Cost driver | 1,600 labor hrs. | 35 setups | Percentage of use | 15,000 units | ||
Production of 850 sets of cutting shears, one of the companys 20 products, took 190 labor hours and 6 setups and consumed 13 percent of the product-sustaining activities. |
Required: |
a. | Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? (Round intermediate calculations to 2 decimal places andfinal answer to the nearest dollar amount.) |
b. | How much overhead is allocated to the cutting shears using activity-based costing? (Round your answer to the nearest dollar amount.) |
c. | Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 850 units are produced. If direct product costs are $190 and the product is priced at 30 percent above cost, for what price would the product sell under each allocation system? (Round intermediate calculations and final answers to 2 decimal places.) |
Required: a. Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? (Round intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) llocated cost b. How much overhead is allocated to the cutting shears using activity-based costing? (Round your answer to the nearest dollar amount.) located cost c. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 850 units are produced. If direct product costs are $190 and the product is priced at 30 percent above cost, for what price would the product sell under each allocation system? (Round intermediate calculations and final answers to 2 decimal places.) ABC Labor Hrs Allocated overhead Direct cost Total cost per unit Desired profit Sales price
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