Question

EcoFabrics has budgeted overhead costs of $982,800. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 468,000 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 $374,400 and $608,400 is allocated to the design cost pool. Additional information related to these pools is as follows.\
Wool Cotton Total Machine hours 104,000 104,000 208,000 Number of setups 1,040 520 1,560 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
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 $____________ for the wool product line $__________ cotton product line.
Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach $ _____________per direct labor hour

Answer 1

Answer:

Hence the answer is given as follows,

Calculation of Activity rate:-