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 cutting cost pool is $363,600 and $590,850 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool |
Cotton |
Total |
||||
---|---|---|---|---|---|---|
Machine hours | 101,000 | 101,000 | 202,000 | |||
Number of setups | 1,010 | 505 | 1,515 |
Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.)
Overhead rates for activity-based costing | |||
Cutting |
$enter a dollar amount per machine hour rounded to 2 decimal places |
per machine hour | |
---|---|---|---|
Design |
$enter a dollar amount per setup rounded to 2 decimal places |
per setup |
eTextbook and Media
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 |
$enter a dollar amount |
$enter a dollar amount |
eTextbook and Media
Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.)
Overhead rates using the traditional approach |
$enter the overhead rate per direct labour hour in dollars rounded to 2 decimal places |
per direct labor hour |
eTextbook and Media
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 |
$enter a dollar amount |
$enter a dollar amount |
eTextbook and Media
Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.)
Overhead rates for activity-based costing | |||
Cutting | 363600/202000 = 1.8 per MH | ||
---|---|---|---|
Design | 590850/1515 = 390 per setup |
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 | (101000*1.8+1010*390) = 575700 | 181800+196950 = 378750 |
Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.)
Overhead rates using the traditional approach |
954450/454500 = 2.1 |
per direct labor hour |
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 | 477225 | 954450/2 = 477225 |
EcoFabrics has budgeted overhead costs of $954,450. It has allocated overhead on a plantwide basis to...
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