Vandalay Industries manufactures two products: toasters and blenders. The annual

Question

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,200 units, while 1,500 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 .75 direct labor hours per unit. The total estimated overhead for the period is $149,115. 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 activit Estimated overhead Blenders 420 batches otal 645 batches Toasters ctivity cost pool Setup costs Engineering costs os 8,385 225 batches 70,980 850 engineering hours 840 engineering hours ,690 engineeringhrs 2,750 direct labor,125 direct labor 3,875 direct labor Maintenance costs S69 hours hours Total 149,115 The predetermined overhead allocation rate using the traditional costing system would be closest to Select one: a. $40.30 per direct labor hour b. $132.55 per direct labor hour c. $54.22 per direct labor hour. d. $38.48 per direct labor hour.

Explanation / Answer

Solution 1:

Budgeted direct labor hours = 3875 hours

Budgeted Overhead = $149,115

Predetermined overhead rate = Budgeted overhead / Budgeted direct labor hours = $149,115 / 3875

= $38.48 per direct labor hour

Hence option d is correct.

Solution 2:

Assembly fee of Part 002 = Direct labor hours for Part 002 * Cost allocation rate per direct labor hour for assembling = 300 * $5 = $1,500

Hence option c is correct.

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.