Question

Activity-Based And Department Rate Product Costing and Product Cost Distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.

Answer 1

Answer:

Cutting department = $52.50

Finishing department = $90.00

Explanation:

The computation of factory overhead rates under the multiple production department rate method is shown below:-

For cutting department

= Overhead cost ÷ Direct labor hour

= $315,000 ÷ 6,000

= $52.50

For Finishing department

= Overhead cost ÷ Direct labor hour

= $540,000 ÷ 6,000

= $90.00

Hence, the above are the answers and the same is to be considered