PR $4-3$B Allocate overhead using a single plantwide rate, multiple department rates, and activity$-$based costing

$6.$ Loudspeakers, $$465,430$ and $$66\mathrm{.}49$

Subassembly Department Final Assembly Department

Total

$$400,400198,800114,800$

Obj. $2,3,4$

Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor

$\_\_\_\_\_\_\_\_$ $$714,000$

$\_\_\_\_\_\_\_\_\_\_$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

Setup

Quality control Total

Budgeted Activity Cost $$138,600261,800$

$$400,400$

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

Receivers

Loudspeakers Total

Number of Setups $80$

$320400$

Number of Inspections $450$

$1,7502,200$

Hours$$Subassembly $875525$

$1,400$

Direct Labor Hours$$Final Assembly $525875$

$1,400$ Units

Produced $7,000$

$7,00014,000$

Instructions $1.$ Determine a plantwide overhead rate based upon direct labor hours. $2.$ Determine the total and per$-$unit factory overhead costs allocated to each product, using the plantwide overhead rate in $(1).$

$3.$ 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 fac$-$tory overhead is $$420,000$ and $$294,000$ for the Subassembly and Final Assembly departments, respectively.

$4.$ Determine the total and per$-$unit factory overhead costs allocated to each product, using the multiple production department overhead rates in $(3).$

$5.$ Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.

$6.$ Determine the total and per$-$unit cost assigned to each product under activity$-$based costing. $7.$

Explain the differences in the per$-$unit overhead allocated to each product using the

single plantwide factory overhead rate method, the multiple production department factory overhead rate method, and activity$-$based costing.