Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1600 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 $149,315. 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 215 batches 450 batches 665 batches Engineering costs $73,980 870 engineering 820 engineering hours 1690 engineering hrs Maintenance costs $66,750 2750 direct labor hours 1195 direct labor hours 3945 direct labor hours Total $2100 The overhead cost per Blenders using the traditional costing system would
Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1600 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 $149,315. 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 215 batches 450 batches 665 batches Engineering costs $73,980 870 engineering 820 engineering hours 1690 engineering hrs Maintenance costs $66,750 2750 direct labor hours 1195 direct labor hours 3945 direct labor hours Total $2100 The overhead cost per Blenders using the traditional costing system would
Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1600 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 $149,315. 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 215 batches 450 batches 665 batches Engineering costs $73,980 870 engineering 820 engineering hours 1690 engineering hrs Maintenance costs $66,750 2750 direct labor hours 1195 direct labor hours 3945 direct labor hours Total $2100 The overhead cost per Blenders using the traditional costing system would
Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1600 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 $149,315. 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
215 batches
450 batches
665 batches
Engineering costs
$73,980
870 engineering
820 engineering hours
1690 engineering hrs
Maintenance costs
$66,750
2750 direct labor hours
1195 direct labor hours
3945 direct labor hours
Total
$2100
The overhead cost per Blenders using the traditional costing system would be closest to (Round all answers to two decimal places.)
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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