Exercise 17-3 EcoFabrics has budgeted overhead costs of $963,900. It has allocat

Question

Exercise 17-3 EcoFabrics has budgeted overhead costs of $963,900. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 459,000 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 $367,200 and $596,700 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total 102,000 102,000 204,000 hours Number of setups 1,020 510 1,530 Your answer is correct. Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.) Overhead rates for activity-based costing Cutting Design per machine hour S390 per setup Your answer is correct. Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing. Wool uct line Cotton product line Overhead Allocated sl5814001 $382500 Your answer is incorrect. T Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rates using the traditional approach 2.04 per direct labor hour 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 uct line Cotton product line Overhead Allocated

Explanation / Answer

Overhead rate using traditional approach=963900/459000 = $2.10 per direct labor hour Wood product line 481950 =459000*50%*2.1 Cotton product line 481950 =459000*50%*2.1

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