Oriole has budgeted overhead costs of $1,067,850. It has
allocated overhead on a plantwide basis to its two products (wool
and cotton) using direct labor hours which are estimated to be
508,500 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 $406,800
and $661,050 is allocated to the design cost pool. Additional
information related to these pools is as follows.
Wool |
Cotton |
Total |
||||
Machine hours | 113,000 | 113,000 | 226,000 | |||
Number of setups | 1,130 | 565 | 1,695 |
What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?
Wool product line |
Cotton product line |
|||
Overhead Allocated | $ | $ |
Cost | Cost driver name | Cost driver total | Overhead rate for activitiy-based costing | ||||
Overhead allocated to cutting Cost pool= | $406,800 | Machine Hours | 226000 | $1.80 | ($406,800/226,000) | ||
Overhead allocated to design cost pool= | $661,050 | Number of setups | 1695 | $390.00 | ($661,050/1,695) | ||
Hence, | |||||||
Overhead rates for activity-based costing | |||||||
Cutting | $1.80 | Per machine hour | |||||
Design | $390.00 | per setup | |||||
Wool product line | Cotton product line | ||||||
Machine Hours | 113000 | 113000 | |||||
(a) | Overhead allocated to cutting Cost pool= | $203,400 | $203,400 | ||||
($1.80*113,000) | ($1.80*113,000) | ||||||
Number of setups | 1130 | 565 | |||||
(b) | Overhead allocated to design cost pool= | $440,700 | $220,350 | ||||
($390*1130) | ($390*565) | ||||||
Overhead cost allocated (a) + (b) | $644,100 | $423,750 | |||||
Overhead rates using traditional approach | Total overhead/Direct labour Hours | ||||||
$1,067,850/508,500 | |||||||
$2.10 | per labour hour |
* Please feel free to ask any doubt in comment section. Please give your valuable feedback.
Oriole has budgeted overhead costs of $1,067,850. It has allocated overhead on a plantwide basis to...
EcoFabrics has budgeted overhead costs of $1,115,100. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 531,000 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...
EcoFabrics has budgeted overhead costs of $1,086,750. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 517,500 for the current year. The company ha 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 alocated to the...
EcoFabrics has budgeted overhead costs of $1,086,750. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 517,500 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...
using EcoFabrics has budgeted overhead costs of $1,181,250, It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 562,500 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 cuttino (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to...
EcoFabrics has budgeted overhead costs of $1,039,500. It has allocated overhead on a plantwide basis cotton) using direct labor hours which are estimated to be 495,000 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 $396,000 and...
EcoFabrics has budgeted overhead costs of $1,152,900. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 549,000 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...
EcoFabrics has budgeted overhead costs of $1,039,500. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 495,000 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...
Exercise 17-03 al-a2, bl-b2 EcoFabrics has budgeted overhead costs of $973,350. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct la bor hours which are estimated to be 463,500 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...
EcoFabrics has budgeted overhead costs of $1,143,450. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 544,500 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...
EcoFabrics has budgeted overhead costs of $954,450. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 454,500 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...