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Exercise 17 3 American Fabrics has budgeted overhead costs of $990000 It has allocated overhead on a plant wide basis to its two products wool and cotton using direct labor hours which are

Exercise 17-3

American Fabrics has budgeted overhead costs of $990,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are: cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $360,000 and $630,000 is allocated to the design cost pool. Additional information related to these pools is as follows.
   

Wool

 

Cotton

 

Total

Machine hours   100,000   100,000   200,000
Number of setups   1,000   500   1,500
 
Correct answer. Your answer is correct.
   
Calculate the overhead rates for activity-based costing. (Round answers to 2 decimal places, e.g. $12.25.)
Overhead rates for activity-based costing      
Cutting  

$Entry field with correct answer

per machine hour
Design  

$Entry field with correct answer

per setup
 

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Incorrect answer. Your answer is incorrect. Try again.
   
Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.
   

Wool product line

Cotton product line

Overhead Allocated  

$Entry field with incorrect answer now contains modified data

$Entry field with incorrect answer now contains modified data

 

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Correct answer. Your answer is correct.
   
Calculate the overhead rates using the traditional approach. (Round answers to 2 decimal places, e.g. $12.25.)
Overhead rates using the traditional approach  

$Entry field with correct answer

per direct labor hour
 

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Incorrect answer. Your answer is incorrect. Try again.
   
What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?
   

Wool product line

 

Cotton product line

Overhead Allocated  

$Entry field with incorrect answer

 

$Entry field with incorrect answer

 

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Jun 19 2020 View more View Less

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