Allocate overhead using a single plantwide rate, multiple department rates, and activity-based costing Downhill Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Line Item Description Amount Indirect labor $360,000 Cutting Department 250,000 Finishing Department 560,000 Total $1,170,000 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: Activity Budgeted Activity Cost Activity Base Production control $90,000 Number of production runs Materials handling 270,000 Number of moves Total $360,000 The activity-base usage quantities and units produced for the two products follow: Line Item Description Number of Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units Produced Snowboards 450 5,000 2,000 4,000 5,000 Skis 50 2,500 3,000 3,000 5,000 Total 500 7,500 5,000 7,000 10,000 Required: 1. Determine a single plantwide factory overhead rate based upon direct labor hours. fill in the blank 1 of 1Direct labor overhead rate: $ per direct labor hour 2. Determine the total and per-unit factory overhead costs allocated to each product, using the plantwide overhead rate in (1). Round per unit amounts to the nearest whole cent. Product Total Factory Overhead Factory Overhead Per Unit Snowboards $fill in the blank 2 $fill in the blank 3 Skis $fill in the blank 4 $fill in the blank 5 3. 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 $435,000 and $735,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Production Department Rate Cutting Department $fill in the blank 6 per direct labor hour Finishing Department $fill in the blank 7 per direct labor hour
Allocate
Downhill Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:
| Line Item Description | Amount |
|---|---|
| Indirect labor | $360,000 |
| Cutting Department | 250,000 |
| Finishing Department | 560,000 |
| Total | $1,170,000 |
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:
| Activity | Budgeted Activity Cost |
Activity Base |
|---|---|---|
| Production control | $90,000 | Number of production runs |
| Materials handling | 270,000 | Number of moves |
| Total | $360,000 |
The activity-base usage quantities and units produced for the two products follow:
| Line Item Description | Number of Production Runs | Number of Moves | Direct Labor Hours-Cutting | Direct Labor Hours-Finishing | Units Produced |
|---|---|---|---|---|---|
| Snowboards | 450 | 5,000 | 2,000 | 4,000 | 5,000 |
| Skis | 50 | 2,500 | 3,000 | 3,000 | 5,000 |
| Total | 500 | 7,500 | 5,000 | 7,000 | 10,000 |
Required:
1. Determine a single plantwide factory overhead rate based upon direct labor hours.
fill in the blank 1 of 1Direct labor overhead rate: $ per direct labor hour
2. Determine the total and per-unit
| Product | Total Factory Overhead | Factory Overhead Per Unit |
|---|---|---|
| Snowboards | $fill in the blank 2 | $fill in the blank 3 |
| Skis | $fill in the blank 4 | $fill in the blank 5 |
3. 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 $435,000 and $735,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
| Department | Production Department Rate |
|---|---|
| Cutting Department | $fill in the blank 6 per direct labor hour |
| Finishing Department | $fill in the blank 7 per direct labor hour |
4. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (3). Round per unit amounts to the nearest whole cent.
| Product | Total Factory Overhead | Factory Overhead Per Unit |
|---|---|---|
| Snowboards | $fill in the blank 8 | $fill in the blank 9 |
| Skis | $fill in the blank 10 | $fill in the blank 11 |
5. 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 | $fill in the blank 12 per prod. run |
| Materials Handling | $fill in the blank 13 per move |
| Cutting Department | $fill in the blank 14 per dlh |
| Finishing Department | $fill in the blank 15 per dlh |
6. 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 | $fill in the blank 16 | $fill in the blank 17 |
| Skis | $fill in the blank 18 | $fill in the blank 19 |
7. Comment on the differences in the per-unit overhead allocated to each product using the single plantwide factory overhead rate method, the multiple production department factory overhead rate method, and activity-based costing.
The plantwide overhead method allocates fill in the blank 1 of 15$ of overhead to each product, while the multiple production department method allocates fill in the blank 2 of 15$overhead to snowboards and fill in the blank 3 of 15$ to skis. Both the plantwide and multiple production department methods fill in the blank 4 of 15
distort the allocation of overhead because they fill in the blank 5 of 15
account for how each product consumes overhead. In contrast, activity-based costing allocates fill in the blank 6 of 15$ of factory overhead to snowboards and fill in the blank 7 of 15$ to skis. Activity-based costing fill in the blank 8 of 15
accurately allocates factory overhead because fill in the blank 9 of 15
for how each product consumes overhead. Snowboards consume fill in the blank 10 of 15
direct labor hours in the Finishing Department, which has fill in the blank 11 of 15
overhead. In addition, snowboards consume fill in the blank 12 of 15
production control and materials handling overhead than do skis. This is because snowboards are made in fill in the blank 13 of 15
lots, representing a fill in the blank 14 of 15
variety of styles. Thus, snowboards have fill in the blank 15 of 15
activity costs than skis.
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