Activity-Based And Department Rate Product Costing and Product Cost Distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 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: Budgeted Activity Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Direct Labor Direct Labor Production Number of Hours- Units Hours-Cutting Runs Moves Finishing Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 1. 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 factory overhead $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
Activity-Based And Department Rate Product Costing and Product Cost Distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 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: Budgeted Activity Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Direct Labor Direct Labor Production Number of Hours- Units Hours-Cutting Runs Moves Finishing Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 1. 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 factory overhead $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
(10) ABC:
Transcribed Image Text:Activity-Based And Department Rate Product Costing and Product Cost Distortions
Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:
Indirect labor
$507,000
Cutting Department
156,000
Finishing Department
192,000
Total
$855,000
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:
Budgeted
Activity
Activity Cost
Activity Base
Production control
$237,000
Number of production runs
Materials handling
270,000
Number of moves
Total
$507,000
The activity-base usage quantities and units produced for the two products follow:
Number of
Direct Labor
Direct Labor
Production
Number of
Hours-
Units
Hours-Cutting
Runs
Moves
Finishing
Produced
Snowboards
430
5,000
4,000
2,000
6,000
Skis
70
2,500
2,000
4,000
6,000
Total
500
7,500
6,000
6,000
12,000
Required:
1. 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 factory overhead is
$315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
Transcribed Image Text:Required:
1. 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 factory overhead is
$315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
Department
Production Department Rate
Cutting Department
per direct labor hour
Finishing Department
per direct labor hour
2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent.
Product
Total Factory Overhead
Factory Overhead Per Unit
Snowboards
Skis
3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent.
Activity
Activity Rate
Production Control
per prod. run
Materials Handling
per move
Cutting Department
per dlh
Finishing Department
per dlh
4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.
Product
Total Activity Cost
Activity Cost Per Unit
Snowboards
Skis
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education