Comparing ABC and Plantwide Overhead Cost Assignments Castle Dale Company uses activity-based costing (ABC). The controller identified
Question:
Comparing ABC and Plantwide Overhead Cost Assignments
Castle Dale Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
| Line Item Description | Amount |
| Setting up equipment | $952,000 |
| Other overheard | $5,400,000 |
Setting up equipment is based on setup hours, and other overhead is based on oven hours. Castle Dale produces two products, Fudge and Cookies. Information on each product is as follows:
| Line Item Description | Fudge | Cookies |
| Batches produced | 16,000 | 890,000 |
| Setup hours | 13,600 | 3,400 |
| Oven hours | 5,000 | 35,000 |
Required:
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
| a. Setting up equipment | $ _____ per setup hour |
| b. Other overhead | $____ per oven hour |
2. How much total overhead is assigned to Fudge using ABC? $_____
3. What is the unit overhead assigned to Fudge using ABC?Round to the nearest cent.
$_______per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours.Round to the nearest cent. $____ per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate?$___
6b. What is the difference in total overhead assigned to fudge under the two methods?$___
Expert Answer:
To answer the questions lets calculate the activity rates overhead assigned to Fudge using ABC unit overhead assigned to Fudge using ABC plantwide ove... View the full answer
