Question

Padfolio Club makes two products (Padfolios and Business Cards) for students to use during interview season. The company has two production departments (Forming and Assembly) and operates at capacity. The controller has asked you to compare plant-wide, department, and activity-based cost allocation. Direct Material and Direct Labor is incurred in both production departments (Forming & Assembly) and is directly traced to the two product lines (Padfolios & Business Cards). There are also two types of overhead (Setup & Supervision) incurred in the departments. Overhead costs need to be allocated to the two product lines so the Quinnipiac Padfolio Club can calculate the costs of each product line. Budgeted information for the vearended December 31.2017 is asfollows: $ $ Forming Department Direct Materials Direct Manufacturing Labor Overhead Costs Setup Supervision Padfolios Business Cards 25,000 $ 24,000 $ 41,000 $ 17,000 $ Total 49,000 58,000 $ $ 22,500 20,500 Assembly Department Direct Materials Direct Manufacturing Labor Overhead Costs Setup Supervision $ $ Padfolios Business Cards 4,500 $ 20,000 $ 17,500 $ 22,000$ Total 24,500 39,500 $ $ 50,000 24,000 Other information about the departments activities follows: Setup costs in each department vary with the number of batches processed in each department. The budgeted number of batches for each product line in each department is as follows: Padfolios Setup Batches Forming Department Assembly Department 28 Business Cards 120 90| Total 1 48 133 43 Supervision Costs: Vary with direct manufacturing labor costs in each department. Calculate the total budgeted cost of each product line (Padfolios vs. Business Cards) based on a single plant-wide overhead rate, if tota overhead is allocated based on total direct costs. (Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on a single overhead allocation rate.) он Pool Description OH Pool Amount Budeeted Overhead Rate OH Rate 1 Alloc Base Amount Allocation Rate Alloc Base Description Total Costs Assigned Padfolios Business Cards Total Total Direct Costs Total Overhead Costs Total Manufacturing Costs

Answer 1

1. Calculation of Budgeted overhead rate per product in each department
Forming Department	Total	Padfolios	Business Cards
Set up Cost	$22,500	$4,257	$18,243
Supervision Cost	$20,500	$14,491	$6,009
Basis for the allocation of overhead cost in Forming Dept
Product	Set up Batches	Direct Labour
Padfolios	28	$41,000
Business Cards	120	$17,000
Total	148	$58,000
Assembly Department	Total	Padfolios	Business Cards
Set up Cost	$50,000	$16,165	$33,835
Supervision Cost	$24,000	$10,633	$13,367
Basis for the allocation of overhead cost in Forming Dept
Product	Set up Batches	Direct Labour
Padfolios	43	$17,500
Business Cards	90	$22,000
Total	133	$39,500
2. Calculation of Budgeted cost of each Product
Cost Assigned	Padfolios	Business Cards	Total
Forming Department
Direct Marterials	$25,000	$24,000	$49,000
Direct Labour	$41,000	$17,000	$58,000
Assembly Department
Direct Marterials	$4,500	$20,000	$24,500
Direct Labour	$17,500	$22,000	$39,500
Total Direct Cost	$88,000	$83,000	$1,71,000
Forming Department
Set up Cost	$4,257	$18,243	$22,500
Supervision Cost	$14,491	$6,009	$20,500
Assembly Department
Set up Cost	$16,165	$33,835	$50,000
Supervision Cost	$10,633	$13,367	$24,000
Total Overhead Cost	$45,546	$71,454	$1,17,000
Total Manufacuring Cost	$1,33,546	$1,54,454	$2,88,000