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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.)

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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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