Question

Question 11 EcoFabrics has budgeted overhead costs of $1,096,200. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 522,000 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 (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $417,600 and $678,600 is allocated to the design cost pool. Additional information related to these pools is as follows. Machine hours Number of setups Wool 116,000 1,160 Cotton 116,000 580 Total 232,000 1,740 (a1) (a2) (61) Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach per direct labor hour $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Q11) b1) Overhead rate = Estimated overhead/estimated labor hour = 1096200/522000 = 2.10 per labor hour

Q12) Estimated labor hour = 36000+33000 = 69000

Overhead rate = 731400/69000 = 10.60 per hour

	Car	Truck
Overhead assigned	36000*10.60 = 381600	349800

b2) Overhead rate

	Overhead rate
Setting up machines	207000/1000 = 207 per setup
Assembling	276000/69000 = 4 per labor hour
Inspection	248400/1200 = 207 per inspection