Wildhorse Fabrics has budgeted overhead costs of $988,860. It has allocated overhead on a plant-wide basis...
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Wildhorse Fabrics has budgeted overhead costs of $988,860. It has allocated overhead on a plant-wide basis to its two products (wool and cotton) using direct labour hours, which are estimated to be 494,430 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (the cost driver is machine hours) and design (the cost driver is the number of set-ups). Total estimated machine hours is 211,380, and total estimated number of set-ups is 1,530. Overhead allocated to the cutting cost pool is $422,760 and $566,100 is allocated to the design cost pool. Additional information related to these pools is as follows: Wool Cotton Machine hours 113,290 98,090 Number of set-ups 1,050 480 (a) Determine the amount of overhead assigned to the wool product line and the cotton product line using activity-based costing. Wool Overhead assigned $ Cotton $ What is the difference between the allocation of overhead to the wool and cotton product lines using activity-based costing versus the traditional approach, assuming direct labour hours were incurred evenly between wool and cotton? Activity-based costing Traditional costing Difference Wool $ $ $ Cotton $ $ $ Wildhorse Fabrics has budgeted overhead costs of $988,860. It has allocated overhead on a plant-wide basis to its two products (wool and cotton) using direct labour hours, which are estimated to be 494,430 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (the cost driver is machine hours) and design (the cost driver is the number of set-ups). Total estimated machine hours is 211,380, and total estimated number of set-ups is 1,530. Overhead allocated to the cutting cost pool is $422,760 and $566,100 is allocated to the design cost pool. Additional information related to these pools is as follows: Wool Cotton Machine hours 113,290 98,090 Number of set-ups 1,050 480 (a) Determine the amount of overhead assigned to the wool product line and the cotton product line using activity-based costing. Wool Overhead assigned $ Cotton $ What is the difference between the allocation of overhead to the wool and cotton product lines using activity-based costing versus the traditional approach, assuming direct labour hours were incurred evenly between wool and cotton? Activity-based costing Traditional costing Difference Wool $ $ $ Cotton $ $ $
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Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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