Answer:
1. Cutting = $1.80 per machine hour and Design = $390 per set-up
2.Wool = $626,400 and Cotton = $435,000
3.$2.10 direct labor hours.
Explanation:
<em>First determine the Cost Driver Rate for the Cost Pools :</em>
Cost Driver Rate = Total Cost Pool Overhead / Total Cost Pool Activity
1. Cutting
Cost Driver Rate = Overhead / Total Machine hours
= $417,600 / 232,000
= $1.80 per machine hour
2. Design
Cost Driver Rate = Overhead / Total Number of Set-ups
= $678,600 / 1,740
= $390 per set-up
<em>Allocate the Overhead to Products using the Cost Driver Rates</em>
Wool Cotton
<u>Overheads :</u>
Cutting
Wool ($1.80 × 116,000) $208,800
Cotton ($1.80 × 116,000) $208,800
Design
Wool ($390 × 1,160) $417,600
Cotton ($390 × 580) $226,200
Total $626,400 $435,000
<em>Traditional Approach :</em>
Overhead rate = Total Budgeted Overheads / Total direct labor hours
= $1,096,200 / 522,000
= $ 2.10 direct labor hours.