Activity-Based and Department Rate Product Costing and Product Cost Distortions

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 Cutting Department Finishing Department 507,000 156,000 192,000 855,000 Total 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 Production control Materials handling Budgeted Activity Cost $237,000 270,000 507,000 Activity Base Number of production runs Number of moves Total The activity-base usage quantities and units produced for the two products are shown below. Number of Production Runs Numberof Direct Labor Direct Labor Units Moves Hours Cutting Hours-Finishing Produced 5,000 2,500 7,500 4,000 2,000 6,000 2,000 4,000 6,000 6,000 6,000 12,000 430 Skis 70 Total 500 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. If required, round your answers to two decimal places Department Cutting Department Finishing Department Production Department Rate per direct labor hour per direct labor hour

Explanation / Answer

Cutting Department Cost 315000 Cutting Department Hours 6000 Rate per DLH 52.5 Finishing Department Cost 540000 Finishing Department Hours 6000 Rate per DLH 90 Product Total Factory Overhead Factory Overhead Per Unit Hint Snowboards 390000 65 (4000*52.5)+(2000*90) 390000/6000 Skis 465000 77.5 (2000*52.5)+(4000*90) 465000/6000 Activity Activity Rate Hint Production Control 474 237000/500 Per Prod Run material Handling 36 270000/7500 per move Cutting Department 26 156000/6000 Per DLH Finishing Department 32 192000/6000 Per DLH Product Total activity Cost Activity Cost per unit Hint Snowboards 551820 91.97 (430*474)+(5000*36)+(4000*26)+(2000*32) 551820/6000 Skis 303180 50.53 (70*474)+(2500*36)+(2000*26)+(4000*32) 303180/6000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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