EcoFabrics has budgeted overhead costs of $1,115,100. It has allocated overhead
ID: 2339585 • Letter: E
Question
EcoFabrics has budgeted overhead costs of $1,115,100. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are ertimated to be 531,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related acivity 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 $424,800 and $690,300 is ellocated to the design cost pool. Additional information related to these pools is as follows Wool Cotton Total 118.000 118.000 236.000 Machine hours Number of setups 1.180 1.770 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 LINK TO TEXT Determine the amount of overhead allocated to the wool produer line and the cotton producr line using activity-based costing Wool product line Cotton product ine 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 par 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 corton? Wool product line Cotton product line Overhead AllocatedExplanation / Answer
Working
Cost Pool
Cost
Driver
Wool product line
Cotton product line
Total Driver
Activity Rate per cost driver
Cutting
$ 424,800.00
Machine hours
118000
118000
236000
$ 1.80
Design
$ 690,300.00
Number of Setups
1180
590
1770
$ 390.00
Total
$ 1,115,100.00
Working
Wool product line
Activity Cost Pool
Activity rate
No. of activities
ABC Cost
Cutting
$ 1.80
118000
$ 212,400.00
Design
$ 390.00
1180
$ 460,200.00
$ -
$ -
Total Overhead cost
$ 672,600.00
Working
Cotton product line
Activity Cost Pool
Activity rate
No. of activities
ABC Cost
Cutting
$ 1.80
118000
$ 212,400.00
Design
$ 390.00
590
$ 230,100.00
$ -
$ -
Total Overhead cost
$ 442,500.00
Answers
Overhead rates for Activity based costing
Cutting
$ 1.80
Per machine hour
Design
$ 390.00
Per setup
Wool product line
Cotton product line
Overheads Allocated
$ 672,600.00
$ 442,500.00
Total Overheads
$ 1,115,100.00
Total Direct labor hours
531000
Plantwide Overhead rate
$ 2.10
Answer
Overhead using the traditional approach = $2.10 per Direct labor hour
Allocation of Overheads using traditional approach
Wool product line
Cotton product line
Direct labor hours
265500
265500
Plantwide Overhead rate
$ 2.10
$ 2.10
Overheads applied
$ 557,550.00
$ 557,550.00
Working
Cost Pool
Cost
Driver
Wool product line
Cotton product line
Total Driver
Activity Rate per cost driver
Cutting
$ 424,800.00
Machine hours
118000
118000
236000
$ 1.80
Design
$ 690,300.00
Number of Setups
1180
590
1770
$ 390.00
Total
$ 1,115,100.00
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