Chapter 18 Activity Based Costing Problem 18-3B

PR 18-3B Activity-based department rate product costing and product cost Obj. 3,4 distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor $400,400 Subassembly Department 198,800 Final Assembly Department 114,800 Total $714,000 (Continued) 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 Setup $138,600 Number of setups Quality control 261,800 Number of inspections Total $400,400 The activity-base usage quantities and units produced for the two products follow: Direct Labor Direct Labor Number of Number of Hours- Hours- Units Setups Inspections Subassembly Final Assembly Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000 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 fac tory overhead is $420,000 and $294,000 for the Subassembly and Final Assembly 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. multiple production department factory overhead rate and activity-based costing methods. Explain the difference in the per-unit overhead allocated to each product under the