Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Vernon Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are handmade, but the seasonal rugs require significantly more labor

image text in transcribed
image text in transcribed
Vernon Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are handmade, but the seasonal rugs require significantly more labor because of their decorative designs. The annual number of rugs made and the labor hours required to make each type of rug follow. Number of rugs Number of direct labor hours Seasonal 1,260 124,000 All-Purpose 2,730 165,000 Totals 3.990 289,000 Required a. Assume that annual overhead costs total $86,700. Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug. b. Vernon automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make 1,260 rugs in only 12,500 hours. Vernon continues to make the all-purpose rugs the same way as before. The number of rugs made and the labor hours required to make them after automation follow: Number of ruga Number of direct labor hours Seasonal 1,260 12,500 All-Purpose 2,730 165,000 Totale 3,990 177,500 Overhead costs are expected to increase to $106,500 as a result of the automation Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. Complete this question by entering your answers in the tabs below. Required A Required B Assume that annual overhead costs total 586,700. Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug. (Do not round Intermediate calculations.) Type of Product Allocated Cost Seasonal Al purpose The most appropriate cost driver is Required a. Assume that annual overhead costs total $86,700. Select the appropriate cost driver and determine the amount of overhead to allocate to each type of rug. b. Vernon automates the seasonal rug line, which results in a dramatic decline in labor usage and allows the company to make 1,260 rugs in only 12,500 hours. Vernon continues to make the all-purpose rugs the same way as before. The number of rugs made and the labor hours required to make them after automation follow Number of rugs Number of direct labor hours Seasonal All-Purpose 1,2602 ,730 12,500 165,000 Totals 3,990 177,500 Overhead costs are expected to increase to $106,500 as a result of the automation Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. Complete this question by entering your answers in the tabs below. Required A Required B Allocate the increased overhead cost to the two types of rugs using direct labor hours as the allocation base. (Do not round intermediate calculations.) Type of Product Allocated Cost Seasonal All purpose

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Susan Hamlen

5th Edition

1618534246, 9781618534248

More Books

Students also viewed these Accounting questions

Question

List the components of the strategic management process. page 77

Answered: 1 week ago