Sandy’s Fan Gear makes two different products sold to local sports clubs: baseball caps and lanyards. Products come in several different colours. Overhead costs are currently allocated based on direct labour-hours. During the year the company produced 2,000 caps and 1,500 lanyards. To produce one cap takes 0.4 direct labour-hours and to produce one lanyard takes 0.1 direct labour-hours. The owner, Sandy, has identified other activities that also drive costs and would like to change to an activity-based costing system. She has collected the following information:

Cost Driver	Total Cost of Activity			Cost Driver Volume Caps			Cost Driver Volume Lanyards
Number of machine setups	$	12,000			16			12
Number of inspections	$	800			12			8
Number of shipments	$	10,000			80			60

Required:

1. Compute the amount of overhead to be allocated to each product using the traditional allocation method based on direct labour-hours.

Overhead allocated to caps:

Overhead allocated to lanyards:

Total overhead to be allocated:

2. Compute the amount of overhead to be allocated to each product using the activity-based information in the table. (Round your final answers to the nearest whole number.)

Overhead allocated to Caps Overhead allocated to lanyard

Machine set ups:

Inspections :

Shipments :

Total :