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:

Activity Budgeted Activity Cost Activity Base

Production control $$237,000$ Number of production runs

Materials handling $$270,000$ Number of moves

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Total $$507,000$

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The activity$-$base usage quantities and units produced for the two products follow:

Number of Number of Direct Labor Direct Labor Units

Production moves Hrs cutting Hrs Finishing Produced

Runs

Snowboards $4305,0004,0002,0006,000$

Skis $702,5002,0004,0006,000$

Total $5007,5006,0006,00012,000$

$1.$ 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 costing methods.

Answer rating: 100% (QA)

1 Factory Overhead Rates under Multiple Production Department Rate Method For the Cutting Department Factory Overhead Rate Total Factory Overhead Total Direct Labor Hours Factory Overhead Rate 315000 ... View the full answer