Fancy Foods produces gourmet gift baskets that it distributes online as well as from its small retail store. The following details about overhead costs are taken from its records.
Production Activity | Indirect Labor | Indirect Materials | Other Overhead |
Wrapping | $300,000 | $200,000 |
|
Assembling | 400,000 |
|
|
Product design | 180,000 |
|
|
Obtaining business licenses |
|
| $100,000 |
Cooking | 150,000 | 120,000 |
|
Additional information on the drivers for its production activities follows.
Wrapping | 100,000 | units |
Assembling | 20,000 | direct labor hours |
Product design | 3,000 | design hours |
Obtaining business licenses | 20,000 | direct labor hours |
Cooking | 1,000 | batches |
Required
1. Classify each activity as unit level, batch level, product level, or facility level.
2. Compute the activity overhead rates using ABC. Form cost pools as appropriate.
3. Determine the overhead cost to assign to the following jobs using ABC.
| Holiday Basket | Executive Basket |
Number of units | 8,000 units | 1,000 units |
Direct labor hours | 2,000 DLH | 500 DLH |
Design hours | . . . 40 design hours | 40 design hours |
Batches | . . . 80 batches | 200 batches |
4. What is the cost per unit for the Holiday Basket? What is the cost per unit for the Executive Basket?
5. If the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each Holiday Basket unit? What would be the overhead cost for each Executive Basket unit if a single plantwide overhead rate is used?
6. Compare the costs per unit computed in requirements 4 and 5 for each job. Which cost assignment method provides the most accurate cost? Explain.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.