What is the difference for part D?
Lily, Inc. produces two types of gas grills: a family model and a deluxe model. Lily's 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 company's operations: Family Model Deluxe Model Direct labor costs $71,700 $143,400 Machine hours 2,000 2,000 Setup hours 200 800 Total estimated overhead costs are $430,200. Overhead cost allocated to the machining activity cost pool is $258,120 and $172,080 is allocated to the machine setup activity cost pool. (a) Your answer is correct. 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, e.g. 15.25.) Overhead Rate Machining $ 64.53 per hour Machine set up $ 172.08 per hour e Textbook and Media Attempts: 1 of 3 used Question Part Score 4/ c) Your answer is correct. Determine the difference in allocation between the two approaches. Family Model Deluxe Model Traditional $ 143400 $ 286800 ABC $ 163476 $ 266724 Difference $ 20076 $ 20076 Lily, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: Family Model Deluxe Model Direct labor costs $71,700 $143,400 Machine hours 2,000 2,000 Setup hours 200 800 Packaging hours 50 75 The estimated overhead of $430,200 is allocated as follows: machining activity cost pool $229,440, machine set up $162,520 and packaging $38,240. (1) Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, e.g. 15.25.) Overhead Rate Machining $ 57.36 per hour Machine set up $ 162.52 per hour Packaging $ 305.92 per hour (2) Calculate the overhead allocation for the family model and the deluxe model using three activity cost pools. Overhead Allocation Family model 162520 Deluxe model 267680 What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool? Difference $ The additional cost pool does not benefit the overhead cost allocation significantly
