Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2300 units, while 1400 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $145,315. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: Expected activity Activity cost pool Estimated overhead cost Toasters Blenders Total Setup costs $8585 235 batches 450 batches 685 batches Engineering costs $67,980 820 engineering 830 engineering hours 1650 engineering hrs Maintenance costs $68,750 2790 direct labor hours 1095 direct labor hours 3885 direct labor hours Total $2300 The cost pool activity rate for Engineering Costs would be closest to (Round all answers to two decimal places.) $12.53 per engineering hour. $62.08 per engineering hour. $41.20 per engineering hour. $17.70 per engineering hour.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2300 units, while 1400 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $145,315. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Expected activity

Activity cost pool	Estimated overhead cost	Toasters	Blenders	Total
Setup costs	$8585	235 batches	450 batches	685 batches
Engineering costs	$67,980	820 engineering	830 engineering hours	1650 engineering hrs
Maintenance costs	$68,750	2790 direct labor hours	1095 direct labor hours	3885 direct labor hours
Total	$2300

The cost pool activity rate for Engineering Costs would be closest to (Round all answers to two decimal places.)

		$12.53 per engineering hour.
		$62.08 per engineering hour.
		$41.20 per engineering hour.
		$17.70 per engineering hour.

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