Snowy Company has two products, Snow and Ice products based on th unit of each p

Question

Snowy Company has two products, Snow and Ice products based on th unit of each product. The chief financial officer has suggested converting to activity-based costing. costs are presently allocated to the two Using the data collected shown below, calculate the activity rates under activity based costing and apply overhead under activity based SNOW (show all work on your paper): costing to Product Actlvity Cost Driver Production Quality Control Number of inspections Shipping Total Overhead a) Calculate the activity rates for s 50,000 20 80,000 12 $90.000 30,000 15,000 220,000 Number of setups 28 Number of units shipped Production Quality control Shipping b) Apply overhead to SNOw Production Quality control Shipping

Explanation / Answer

a) Activity rate :

Production = $ 1,000.00

Quality Control = $ 2,000

Shipping = $ 2.00

Note :

b)

Overhead Applied :

Production = $ 20,000

Quality Control = $ 24,000

Shipping = $ 60,000

Note :

Amount Activity Driver Activity ( Snow +Ice) Activity Rate ( Amount / Activity) Production 50,000 Number of Setups 50 1,000.00 Quality Control 80,000 Number of Inspections 40 2,000.00 Shipping 90,000 Number of units Shipped 45000 2.00 Total Overhead 2,20,000

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