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. Wool Total Cotton 116,000 Machine hours 116,000 232,000 1,740 Number of setups 1,160 580 (al) Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing. Wool product line Cotton product line Overhead Allocated Click if you would like to Show Work for this question: Open Show Work

Answer 1

11)

a2.

Overhead allocated:

Wool = [($417,600 / 232,000) X 116,000] + [($678,600 / 1,740) X 1,160] = $661,200

Cotton =  [($417,600 / 232,000) X 116,000] + [($678,600 / 1,740) X 580] = $435,000

12)

a2.

Total labor hours = (36,000 X 1) + (11,000 X 3) = 69,000

Car wheels = ($731,400 / 69,000) X 36,000 = $381,600

Truck wheels = ($731,400 / 69,000) X (11,000 X 3) = $349,800