In order to compare WoolCorp’s current method with activity-based costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn. Type of Cost Activity Base Total Cost Sorting Hours of sorting $25,600 Cleaning Units of cleaning machine power 38,400 Combing Hours of combing machine use 1,200   Raw Wool Wool Yarn Hours of sorting required 800     3,200     Units of cleaning machine power required 1,800     4,200     Hours of combing machine use required 80     20     In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent. Activity Activity Rate Sorting $fill in the blank ea9f75022074fe3_1 per sorting hour Cleaning $fill in the blank ea9f75022074fe3_2 per unit of cleaning machine power Combing $fill in the blank ea9f75022074fe3_3 per hour of combing machine use In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product’s process. When required, round your answers to the nearest dollar.   Raw Wool Wool Yarn Sorting cost $fill in the blank ea9f75022074fe3_4 $fill in the blank ea9f75022074fe3_5 Cleaning cost fill in the blank ea9f75022074fe3_6 fill in the blank ea9f75022074fe3_7 Combing cost fill in the blank ea9f75022074fe3_8 fill in the blank ea9f75022074fe3_9 Total cost $fill in the blank ea9f75022074fe3_10 $fill in the blank ea9f75022074fe3_11   Question Content Area Final Question After reviewing your work on the Single Plantwide Rate and Activity-Based Costing panels, which of the costing method would you recommend to WoolCorp, and why?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. In order to compare WoolCorp’s current method with activity-based costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn.

    Type of Cost Activity Base Total Cost
    Sorting Hours of sorting $25,600
    Cleaning Units of cleaning machine power 38,400
    Combing Hours of combing machine use 1,200

      Raw Wool Wool Yarn
    Hours of sorting required 800     3,200    
    Units of cleaning machine power required 1,800     4,200    
    Hours of combing machine use required 80     20    

    In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent.

    Activity Activity Rate
    Sorting $fill in the blank ea9f75022074fe3_1 per sorting hour
    Cleaning $fill in the blank ea9f75022074fe3_2 per unit of cleaning machine power
    Combing $fill in the blank ea9f75022074fe3_3 per hour of combing machine use

    In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product’s process. When required, round your answers to the nearest dollar.

      Raw Wool Wool Yarn
    Sorting cost $fill in the blank ea9f75022074fe3_4 $fill in the blank ea9f75022074fe3_5
    Cleaning cost fill in the blank ea9f75022074fe3_6 fill in the blank ea9f75022074fe3_7
    Combing cost fill in the blank ea9f75022074fe3_8 fill in the blank ea9f75022074fe3_9
    Total cost $fill in the blank ea9f75022074fe3_10 $fill in the blank ea9f75022074fe3_11
     

    Question Content Area

    Final Question

    After reviewing your work on the Single Plantwide Rate and Activity-Based Costing panels, which of the costing method would you recommend to WoolCorp, and why?

     
     
     
 
Expert Solution
Step 1 Introduction

The overhead is applied to the production on the basis of a pre-determined overhead rate.

The predetermined overhead rate can be computed using various approaches as a single plantwide overhead rate or activity-based costing.

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