Exam 26: Cost Allocation and Activity-Based Costing

The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per product and the total overhead information: Setups Insp ections Assembly dlh) Small Lamps-3,000 units 8,000 9,000 16,000 Desk Lamps-6,000 units 16,000 15,000 12,000 Activity Pool Activity Base Budgeted Amount Setups 24,000 \ 60,000 Inspections 24,000 \ 120,000 Assembly dlh) 28,000 \ 280,000 -Calculate the total factory overhead to be charged to desk lamps.

If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 26,000 units are produced?

Multiple production department factory overhead rates are most useful when production departments significantly differ in their manufacturing processes.

All of the following can be used as an allocation base for calculating factory overhead rates except:

Which of the following is not a reason for banks to use activity-based costing?

Given the following information, determine the activity rate for setups. Activity Pool Activity Base Budgeted Amount Setups 10,000 \ 180,000 Inspections 24,000 \ 120,000 Assembly DLH) 80,000 \ 400,000

The Roget Factory has determined that its budgeted factory overhead budget for the year is $15,500,000. They plan to produce 2,000,000 units. Budgeted direct labor hours are 1,050,000 and budgeted machine hours are 750,000. Using the single plantwide factory overhead rate based on direct labor hours, calculate the factory overhead rate for the year.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. -Determine the overhead rate in the Painting Department for each unit of Product B if Blue Ridge Marketing Inc. uses a multiple department rate system.

Tulip Company produces two products, T and U. The indirect labor costs include the following two items: Plant supervision \ 700,000 Setup labor indirect) \ 300,000 Total indirect labor \ 1,000,000 The following activity-base usage and unit production information is available for the two products: Number of Direct Labor Setups Hours Units Product T 200 900 Froduct U Total a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base. b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate. c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups. d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing. e) Why is the factory overhead cost per unit different for the two products under the two methods?

Service companies can effectively use multiple department overhead rate costing to compute product service) costs.