EcoFabrics has budgeted overhead costs of $1,020,600. It has allocated overhead

Question

EcoFabrics has budgeted overhead costs of $1,020,600. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 486,000 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 $ 388,800 and $631,800 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total Machine hours 108,000 108,000 216,000 1,080 540 1,620 Number of setups 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 per machine hour 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 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 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?

Explanation / Answer

Calculation of overhead Rates using activity based costing Cutting 388800/216000 1.8 per machine hour Design 631800/1620 390 per setup Amount of overhead allocated to the wool product line Wool Cotton machine 194400 194400 (108000*1.8) (108000*1.8) no of setups 421200 210600 (1080*390) (540*390) overhead allocated 615600 405000 overhead rate using traditional approach 1020600/486000 = 2.1per direct labour hour Overhead Allocation using ttraditional Approch Wool Cottton Overhead Allocation 510300 510300

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.