Question

Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment $378,000 Other overheard $9,240,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Fudge Cookies Units produced 8,000 445,000 Setup hours 7,200 1,800 Oven hours 7,000 49,000 Required: Round your answers to the nearest whole dollar, unless otherwise directed. 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead. a. Setting up equipment 42 per setup hour $ $ b. Other overhead 165 per oven hour 2. How much total overhead is assigned to Fudge using ABC? $ 467,400 X 3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $ 58.4 X per unit 4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent. $ 171.8 X per oven hour

Answer 1

2)	Overhead to be assigned to Fudge
	Setting up cost ($42 per hour *7200 hours )	$          3,02,400
	Other Overhead ($165 per hour *7000 hours )	$       11,55,000
	Total	$       14,57,400
3)	Unit overhead cost assigned
	= total overhead assigned / total units
	=$1457400/8000 units
	=$182.18
4)	Plantwide overhead rate
	= Total Overheads / total oven hours
	=($378000+9240000)/(7000+49000)
	=$171.75 per hour
5)	total overhead to be assigned to fudge
	=$171.75*7000 hour
	=$1202250
6a)	different treatment for setup
b	differece in total overhead assigned
	=$1457400-1202250
	=$255150
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