Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:Indirect labor$507,000Cutting Department156,000Finishing Department192,000 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:Activity Budgeted Activity Cost Activity BaseProduction control $237,000 Number of production runsMaterials handling 270,000 Number of movesTotal $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units ProducedSnowboards 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. 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 tothe nearest whole cent.Total Factory OverheadProductSnowboardsSkis3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to thenearest whole cent.ActivityProduction ControlMaterials HandlingCutting DepartmentFinishing DepartmentFactory Overhead Per Unit$$ProductSnowboardsActivity Rateper prod. runper moveper dlhper dlh4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.Total Activity CostActivity Cost Per UnitSkis5. Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costingmethods.. Theconsume more factory overhead on a per-unit basis than domethod does not show this because all factory overhead is assumed to be proportional to direct labor hours. Themethod separatelyaccounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is becausesnowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards have higher activity costs per unit than skis.The activity-based overhead allocation reveals that SnowboardsSkisTotalNumber ofProduction RunsCutting DepartmentFinishing DepartmentProductSnowboards43070ActivityProduction ControlMaterials Handling500Number ofMoves5,0002,5007,500Direct LaborHours-Cutting4,0002,0006,000Required:1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so thatthe total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.DepartmentProduction Department Rateper direct labor hourper direct labor hourActivity Rate2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts tothe nearest whole cent.Total Factory Overhead$$Direct LaborFactory Overhead Per UnitHours-Finishing2,0004,0006,000UnitsProduced6,0006,00012,000Skis3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to thenearest whole cent.per prod. runper move

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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: Activity Budgeted 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 Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units 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.

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3PB: Activity-based department rate product costing and product cost distortions Big Sound Inc....

	Number of Production Runs		Number of Moves	Direct Labor Hours-Cutting		Direct Labor Hours-Finishing	Units 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