Exercise 17-3EcoFabrics has budgeted overhead costs of $973,350. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 463,500 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 $370,800 and $602,550 is allocated to the design cost pool. Additional information related to these pools is as follows.WoolCottonTotalMachine hours103,000103,000206,000Number of setups1,0305151,545Calculate the overhead rate using activity based costing. (Round answers to 2 decimal places, e.g. 12.25.)Overhead rates for activity-based costingCutting$ per machine hourDesign$ per setupDetermine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.Wool product lineCotton product lineOverhead Allocated$$Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e.g. 12.25.)Overhead rates using the traditional approach$ per direct labor hourWhat amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?Wool product lineCotton product lineOverhead Allocated$$
RECOMMENDED!!EcoFabrics has budgeted overhead costs
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