Please help me with the answers in the red. Exercise 16-3 EcoFabrics has budgete
ID: 2390879 • Letter: P
Question
Please help me with the answers in the red.
Exercise 16-3 EcoFabrics has budgeted overhead costs of $1,162,350. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 553,500 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 $442,800 and $719,550 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total Machine hours 123,000 123,000 246,000 Number of setups 1,230 615 ,845 Your answer is correct. 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 Design per machine hour 890 per setup X Your answer is incorrect. Try again. Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing. Wool product lineCotton product line Overhead Allocated 460850 700700 Your answer is correct. Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach 32.10 per direct labor hour Your answer is correct. 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 8117 811Explanation / Answer
Overhead retes for Activity based costing
Cutting $1.80 per machine hour
Design $390 per set-up
Overhead allocated to Wool = Cutting overhead + Design overhead
= 123,000 x 1.80 + 1,230 x 390
= 221,400 + 479,700
=$701,100
Overhead allocated to Cotton = Cutting overhead + Design overhead
= 123,000 x 1.80 + 615 x 390
= 221,400 + 239,850
=$461,250
Machine hours No. of set-ups Wool 123,000 1,230 Cotton 123,000 615