Question

Coats Galore Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Calculate the activity-based overhead rates using the following budgeted data for each of the activity cost pools. (Round answers to 2 decimal places, e.g. 15.25.)

Activity Cost Pools		Estimated Overhead		Estimated Use of Cost Drivers per Activity
Designing		$494,460		16,400	designer hours
Sizing and cutting		4,121,040		184,800	machine hours
Stitching and trimming		1,600,525		87,700	labour hours
Wrapping and packing		387,550		33,700	finished units

Cost Pool		Rate
Designing		$ ( ) per designer hr.
Sizing and cutting		$ ( ) per machine hr.
Stitching and trimming		$( ) per labour hr.
Wrapping and packing		$( ) per unit

Answer 1

Activity - Based Costing :-

It is method of assigning indirect costs to products and services by identifying cost of each activity involved in the Production Process and assign these costs to each product based on its consumption of each activity.

Activity Based Overhead Rate

= (Estimated Overhead) ÷ (No. of Units or hours for activity)

COST POOL	Rate
Designing	$30.15 Per designer hours
Sizing and Cutting	$22.30 per machine hours
Stitching and trimmings	$18.25 per labour hours
Wrapping and Packaging	$11.50 per unit

Explanation :-