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Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department Test and Pack Department Total The direct labor information for the production of 7,500 units of each product is as follows: Blender Toaster oven Total $186,000 120,000 $306,000 Assembly Department 750 dih 2,250 3,000 dih Toaster oven Test and Pack Department 2,250 dih 750 Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. 3,000 dih The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Assembly Activity Test and Pack Activity Setup Activity b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit Blender per dih per dih per setup

Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department Test and Pack Department Total The direct labor information for the production of 7,500 units of each product is as follows: Blender Toaster oven Total $186,000 120,000 $306,000 Assembly Department 750 dih 2,250 3,000 dih Toaster oven Test and Pack Department 2,250 dih 750 Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. 3,000 dih The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Assembly Activity Test and Pack Activity Setup Activity b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit Blender per dih per dih per setup

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Activity-Based Costing and Product Cost Distortion Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department Test and Pack Department Total The direct labor information for the production of 7,500 units of each product is as follows: Blender Toaster oven Total $186,000 120,000 $306,000 Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. Assembly Activity Test and Pack Activity Setup Activity Assembly Department Test and Pack Department 750 dih 2,250 dlh 750 3,000 dlh The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the 2,250 3,000 dlh production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Blender Toaster oven per dih per dih b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit per setup
Transcribed Image Text:Activity-Based Costing and Product Cost Distortion Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department Test and Pack Department Total The direct labor information for the production of 7,500 units of each product is as follows: Blender Toaster oven Total $186,000 120,000 $306,000 Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. Assembly Activity Test and Pack Activity Setup Activity Assembly Department Test and Pack Department 750 dih 2,250 dlh 750 3,000 dlh The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the 2,250 3,000 dlh production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Blender Toaster oven per dih per dih b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit per setup
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