Exam 18: Activity-Based Costing

Use of a plantwide factory overhead rate does not distort product costs when products require different ratios of allocation-base usage in each production department.

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).

Calculate the total factory overhead to be charged to Nooks.

Kettle Factory produces two similar products - gloves and mittens.The total plant budget is $1,050,000 with 600,000 estimated direct labor hours.It is further estimated that glove production will require 375,000 direct labor hours and mitten production will require 225,000 direct labor hours.

Activity cost pools are assigned to products,using factory overhead rates for each activity.

If the budgeted factory overhead cost is $460,000,the budgeted direct labor hours is 80,000,and the actual direct labor hours is 6,700 for the month,the factory overhead rate for the month is $68.65 (if the allocation is based on direct labor hours).

Calculate the total factory overhead to be charged to each unit of Hooks.

What is the overhead cost per unit for Dings?

Zorn Co.budgeted $600,000 of factory overhead cost for the coming year.Its plantwide allocation base,machine hours,is budgeted at 100,000 hours.Budgeted units to be produced are 200,000 units.Zorn's plantwide factory overhead rate is $6.00 per unit.

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