Black and Blue Sports Inc., manufactures two products: snowboards and skis. The factory overhead incurred is as follows:
Indirect labor ............ $ 507,000
Cutting Department ......... 156,000
Finishing Department ......... 192,000
Total ............... $855,000
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:

The activity- base usage quantities and units produced for the two products are shown below.

Instructions
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.
2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1).
3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.
4. Determine the total and per- unit cost assigned to each product under activity-based costing.
5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costingmethods.

Transcribed Image Text:

Activity Production control Materials handling Activity Base Budgeted Activity Cost $237,000 270,000 507,000 Number of production runs Number of moves Total Number of Production Number of Direct Labor Direct Labor Units Runs Moves Hours Cutting Hours-Finishing Produced Snowboards Skis 430 70 500 5,000 2,500 7,500 4,000 2,000 6,000 2,000 4,000 6,000 6,000 6,000 12,000 Total