Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 78,300 $ 28,910 $ 15,000 $ 180,000 Cost driver 2,700 labor hours 49 setups Percentage of use 18,000 units Production of 730 sets of cutting shears, one of the company's 20 products, took 180 labor hours and 5 setups and consumed 16 percent of the product - sustaining activities. Required Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? How much overhead is allocated to the cutting shears using activity-based costing? Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 730 units are produced. If direct product costs are $180 and the product is priced at 25 percent above cost for what price would the product sell under each allocation system?

Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 78,300 $ 28,910 $ 15,000 $ 180,000 Cost driver 2,700 labor hours 49 setups Percentage of use 18,000 units Production of 730 sets of cutting shears, one of the company's 20 products, took 180 labor hours and 5 setups and consumed 16 percent of the product - sustaining activities. Required Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? How much overhead is allocated to the cutting shears using activity-based costing? Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 730 units are produced. If direct product costs are $180 and the product is priced at 25 percent above cost for what price would the product sell under each allocation system?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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