Mason Metal Creations Ltd is a small company located in Barrie, Ontario. Currently, the company produces...

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Mason Metal Creations Ltd is a small company located in Barrie, Ontario. Currently, the company produces two products - welcome signs and door hooks. For the 2020, the company budgeted overhead costs of $375,000. It has allocated overhead on a factory-wide basis to its two products using direct labor hours which are estimated to be 182,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are: welding (cost driver is number of setups) and polishing (cost driver is number of batches). Overhead allocated to the Welding cost pool is $177,000 and $198,000 is allocated to the Polishing cost pool. Additional information related to these pools is as follows. Number of batches Number of setups Welcome Signs 305 34,000 Door Hooks 175 Total 480 30,500 64,500 Instructions (a) Determine the amount of overhead allocated to the welcome signs product line and the door hooks product line using activity-based costing. (5 marks) (b) What is the difference between the allocation of overhead to the welcome signs and door hooks product lines using activity-based costing versus the traditional approach, assuming direct labor hours were incurred evenly between the welcome signs and door hooks? (6 marks) Mason Metal Creations Ltd is a small company located in Barrie, Ontario. Currently, the company produces two products - welcome signs and door hooks. For the 2020, the company budgeted overhead costs of $375,000. It has allocated overhead on a factory-wide basis to its two products using direct labor hours which are estimated to be 182,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are: welding (cost driver is number of setups) and polishing (cost driver is number of batches). Overhead allocated to the Welding cost pool is $177,000 and $198,000 is allocated to the Polishing cost pool. Additional information related to these pools is as follows. Number of batches Number of setups Welcome Signs 305 34,000 Door Hooks 175 Total 480 30,500 64,500 Instructions (a) Determine the amount of overhead allocated to the welcome signs product line and the door hooks product line using activity-based costing. (5 marks) (b) What is the difference between the allocation of overhead to the welcome signs and door hooks product lines using activity-based costing versus the traditional approach, assuming direct labor hours were incurred evenly between the welcome signs and door hooks? (6 marks)

Answer rating: 100% (QA)

a To determine the amount of overhead allocated to the Welcome Signs and Door Hooks product lines using activitybased costing we need to allocate the overhead costs based on the activity cost drivers ... View the full answer