Exercise 17-3 (Part Level Submission) EcoFabrics has budgeted overhead costs of

Question

Exercise 17-3 (Part Level Submission) EcoFabrics has budgeted overhead costs of $954,450. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 454,500 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 $363,600 and S590,850 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total Machine hours 101,000 101,000 202,000 Number of setups 1,010 505 1,515 (a1) 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 Click if you would like to Show Work for this question: 1.8 per machine hour so per setup Open Show Work LINK TO TEXT LINK TO TEXT Attempts:1 of 15 used

Explanation / Answer

a.2)

Overhead allocated to Wool Product line:

Cutting = Machine hours x Overhead rate per machine hour
=> 101,000 x $1.8 = $181,800

Design = Number of Set-ups x Overhead rate per set-up
=> 1,010 x $390 = $393,900

Total Overhead allocated to Wool Product line = $181,800 + $393,900 = $575,700

Overhead allocated to Cotton Product line:

Cutting = Machine hours x Overhead rate per machine hour
=> 101,000 x $1.8 = $181,800

Design = Number of Set-ups x Overhead rate per set-up
=> 505 x $390 = $196,950

Total Overhead allocated to Wool Product line = $181,800 + $196,950 = $378,750

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