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:  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  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 $ $  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  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 $ $  Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. The activity-based overhead allocation reveals that _______  consume more factory overhead on a per-unit basis than do  ________. The _______  method does not show this because all factory overhead is assumed to be proportional to direct labor hours. The ______  method separately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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.

Department

Production Department Rate

Cutting Department

$ _____ per direct labor hour

Finishing Department

$ _____ per direct labor hour

  1.  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

$

$

  1.  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

  1.  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

$

$

  1.  Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.

The activity-based overhead allocation reveals that _______  consume more factory overhead on a per-unit basis than do  ________. The _______  method does not show this because all factory overhead is assumed to be proportional to direct labor hours. The ______  method separately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards

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Cost accounting is the accounting which helps in calculating the cost of a product or the service of the organisation.

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