Exam 11: Cost Allocation and Activity-Based Costing

The Sawtooth Leather Company manufactures leather handbags and moccasins.For simplicity, the company has decided to use a single plantwide factory overhead rate method to allocate factory overhead.Calculate the amount of factory overhead to be allocated to each unit using direct labor hours. Handbags = 60,000 units, 2 hours of direct labor Moccasins = 40,000 units, 3 hours of direct labor Total budgeted factory overhead cost = $360,000

Condelezza Co.manufactures two products, A and B, in two production departments, Assembly and Finishing.Condelezza Co.expects to produce 10,000 units of Product A and 20,000 units of Product B in the coming year.Budgeted factory overhead costs for the coming year are: The machine hours expected to be used in the coming year are as follows: a Compute the plantwide factory overhead rate. Compute the production department factory overhead rates. b Compute the factory overhead per unit for each product using 1 the single plantwide rate and 2 production department factory overhead rates. c Which method is better plantwide or department? Why?

Calculate the plantwide factory overhead rate for Adirondack Marketing Inc.

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

Calculate the cost of services for a highlight.

Using a single plantwide rate, determine the overhead rate per unit for Blue Ridge Marketing Inc.'s Product B.

Determine the activity-based cost for each wire drive unit.

When a plantwide factory overhead rate is used, the total overhead costs allocated to all products are the same.

Determine the overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc.uses a multiple department rate system.

The Botosan Factory has determined that its budgeted factory overhead budget for the year is $13,500,000 and budgeted direct labor hours are 10,000,000.If the actual direct labor hours for the period are 350,000, how much overhead would be allocated to the period?

Direct labor hours is not a cost pool that is regularly used in the activity-based costing method.

Everest Co.uses a plantwide factory overhead rate based on direct labor hours.Overhead costs would be overcharged to which of the following departments?

Common allocation bases are

Activity rates are determined by

Service organizations can use activity-based costing to allocate selling and administrative costs to services provided.

Use of a plantwide factory overhead rate does not distort product costs when there are differences in the factory overhead rates across different production departments.

If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to table lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 75,000 units are produced?

In a service organization, the multiple department overhead rate method is the most effective in providing information about the cost of services.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?

The total factory overhead for Big Light Company is budgeted for the year at $807,500.Big Light manufactures two different products - night lights and desk lamps.Night lights is budgeted for 60,000 units.Each night light requires 1/2 hour of direct labor.Desk lamps is budgeted for 80,000 units.Each desk lamp requires 2 hours of direct labor.Determine a the total number of budgeted direct labor hours for year, b the single plantwide factory overhead rate using direct labor hours as the allocation base, and c the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in b.