Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Line Item Description Amount Indirect labor $400,400 Subassembly Department 198,800 Final Assembly Department 114,800 Total $714,000 The activity-base usage quantities and units produced for the two products follow: Line Item Description Number of Setups Number of Inspections Direct Labor Hours—Subassembly Direct Labor Hours—Final Assembly Units Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000 Required: 1. Determine a plantwide 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 Receivers $fill in the blank 2 $fill in the blank 3 Loudspeakers $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 $420,000 and $294,000 for the Subassembly and Final Assembly departments, respectively. Department Production Department Rate Subassembly Department $fill in the blank 6 per direct labor hour Final Assembly Department $fill in the blank 7 per direct labor hour
Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory
| Line Item Description | Amount |
|---|---|
| Indirect labor | $400,400 |
| Subassembly Department | 198,800 |
| Final Assembly Department | 114,800 |
| Total | $714,000 |
The activity-base usage quantities and units produced for the two products follow:
| Line Item Description | Number of Setups |
Number of Inspections |
Direct Labor Hours—Subassembly |
Direct Labor Hours—Final Assembly |
Units Produced |
|---|---|---|---|---|---|
| Receivers | 80 | 450 | 875 | 525 | 7,000 |
| Loudspeakers | 320 | 1,750 | 525 | 875 | 7,000 |
| Total | 400 | 2,200 | 1,400 | 1,400 | 14,000 |
Required:
1. Determine a plantwide 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 |
|---|---|---|
| Receivers | $fill in the blank 2 | $fill in the blank 3 |
| Loudspeakers | $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 $420,000 and $294,000 for the Subassembly and Final Assembly departments, respectively.
| Department | Production Department Rate |
|---|---|
| Subassembly Department | $fill in the blank 6 per direct labor hour |
| Final Assembly 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 |
|---|---|---|
| Receivers | $fill in the blank 8 | $fill in the blank 9 |
| Loudspeakers | $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 |
|---|---|
| Setup | $fill in the blank 12 per setup |
| Quality Control | $fill in the blank 13 per inspection |
| Subassembly Department | $fill in the blank 14 per direct labor hour |
| Final Assembly Department | $fill in the blank 15 per direct labor hour |
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 |
|---|---|---|
| Receivers | $fill in the blank 16 | $fill in the blank 17 |
| Loudspeakers | $fill in the blank 18 | $fill in the blank 19 |
7. Comment on the differences in the per-unit overhead allocated to each product using the single plantwide factory overhead rate method, the multiple production department factory overhead rate method, and activity-based costing.
The plantwide overhead method allocates fill in the blank 1 of 12$ of overhead to each product, while the multiple production department method allocates fill in the blank 2 of 12$ overhead to receivers and fill in the blank 3 of 12$ to loudspeakers. Both the plantwide and multiple production department overhead methods fill in the blank 4 of 12
distort the allocation of overhead because they fill in the blank 5 of 12
account for how each product consumes overhead. In contrast, activity based costing allocates fill in the blank 6 of 12$ of factory overhead to receivers and fill in the blank 7 of 12$ to loudspeakers. Activity-based costing fill in the blank 8 of 12
accurately allocates factory overhead because fill in the blank 9 of 12
for how each product consumes overhead. Loudspeakers have fill in the blank 10 of 12
setups than do receivers. In addition, loudspeakers require fill in the blank 11 of 12
quality control inspections than do receivers. As a result, loudspeakers have fill in the blank 12 of 12
activity costs than receivers.
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