Question

EcoFabrics has budgeted overhead costs of $1,058,400. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 504,000 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 $403,200 and $655,200 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total Machine hours 112,000 112,000 224,000 Number of setups 1,120 560 1,680 Your answer is incorrect. Try again. 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 $ per machine hour Design $ per setup LINK TO TEXT LINK TO TEXT 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 line Cotton product line Overhead Allocated $ $

Answer 1

Answer:

cutting rate: 1.8 dollars

Desing rate: 390

Cotton overhead allocated:

201,600 cutting + 218,400 desing = 420,000

Wool overhead allocated:

201,600 cutting + 436,800 desing = 638,400

Explanation:

Cutting actvity

cutting cost pool: 403,200 dollars

base total machine hours: 224,000

activity rate 403,200 / 224,000 = 1.8 dollar

allocate to  cotton: 1.8 x 112,000 = 201,600

allocate to wool:     1.8 x 112,000 = 201,600

Desing  actvity

desing cost pool: 655,200 dollars

base total machine hours: 1,680

activity rate 655,200 / 1,680  = 390 dollars

allocate to  cotton: 560 x 390  = 218,400

allocate to wool:     1,120 x 390 = 436,800