Allocate overhead using a single plantwide rate, multiple department rates, and activity-based costing Downhill Sports Inc. manufactures
Question:
Allocate overhead using a single plantwide rate, multiple department rates, and activity-based costing
Downhill Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:
Line Item Description | Amount |
---|---|
Indirect labor | $360,000 |
Cutting Department | 250,000 |
Finishing Department | 560,000 |
Total | $1,170,000 |
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:
Activity | Budgeted Activity Cost | Activity Base |
---|---|---|
Production control | $90,000 | Number of production runs |
Materials handling | 270,000 | Number of moves |
Total | $360,000 |
The activity-base usage quantities and units produced for the two products follow:
Line Item Description | Number of Production Runs | Number of Moves | Direct Labor Hours-Cutting | Direct Labor Hours-Finishing | Units Produced |
---|---|---|---|---|---|
Snowboards | 450 | 5,000 | 2,000 | 4,000 | 5,000 |
Skis | 50 | 2,500 | 3,000 | 3,000 | 5,000 |
Total | 500 | 7,500 | 5,000 | 7,000 | 10,000 |
Required:
1. Determine a single plantwide factory overhead rate based upon direct labor hours.
FILL IN THE BLANK Direct labor overhead rate: $ per direct labor hour
2. Determine the total and per-unit factory overhead costs allocated to each product, using the plantwide overhead rate in (1). Round per unit amounts to the nearest whole cent.
Product | Total Factory Overhead | Factory Overhead Per Unit |
---|---|---|
Snowboards | $fill in the blank 2 | $fill in the blank 3 |
Skis | $fill in the blank 4 | $fill in the blank 5 |
3. 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 $435,000 and $735,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
Department | Production Department Rate |
---|---|
Cutting Department | $fill in the blank 6 per direct labor hour |
Finishing Department | $fill in the blank 7 per direct labor hour |
4. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (3). Round per unit amounts to the nearest whole cent.
Product | Total Factory Overhead | Factory Overhead Per Unit |
---|---|---|
Snowboards | $fill in the blank 8 | $fill in the blank 9 |
Skis | $fill in the blank 10 | $fill in the blank 11 |
5. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent.
Activity | Activity Rate |
---|---|
Production Control | $fill in the blank 12 per prod. run |
Materials Handling | $fill in the blank 13 per move |
Cutting Department | $fill in the blank 14 per dlh |
Finishing Department | $fill in the blank 15 per dlh |
6. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.
Product | Total Activity Cost | Activity Cost Per Unit |
---|---|---|
Snowboards | $fill in the blank 16 | $fill in the blank 17 |
Skis | $fill in the blank 18 | $fill in the blank 19 |
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac