Total Overhead $ 11,34,000.00 Wool Cotton Total Machine Hours 120000 120000 2400
ID: 372912 • Letter: T
Question
Total Overhead $ 11,34,000.00 Wool Cotton Total Machine Hours 120000 120000 240000 Number of Setups 1200 600 1800 Direct labur Hours 270000 270000 540000 Cutting Design Total Overhead Cost $ 4,32,000.00 $ 7,02,000.00 $ 11,34,000.00 Rate (Overhead Cost/ Total Machine or Number of Setup ) $ 1.80 $ 390.00 Wool Cotton Total Overhead Cost Cutting (Rate*Machine Hours ) $ 2,16,000.00 $ 2,16,000.00 $ 4,32,000.00 Design (Rate*Number of Setups) $ 4,68,000.00 $ 2,34,000.00 $ 7,02,000.00 Total $ 6,84,000.00 $ 4,50,000.00 $ 11,34,000.00 Wool Cotton Total Traditional Approach Overhead Cost $ 5,67,000.00 $ 5,67,000.00 $ 11,34,000.00Explanation / Answer
Exercise 16-3 EcoFabrics has budgeted overhead costs of $1,134,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 540,000 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 $432,000 and $702,000 is allocated to the design cost pool. Additional information related to these pools is as follows Wool Cotton Total Machine hours 120,000 120,000 240,000 Number of setups 1,200 600 1,800 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 Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing per machine hour per setup Wool product lineCotton product line Overhead Allocated Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach s 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 Allocateds