Question

The total factory overhead for Diva-nation is budgeted for the year at $161,304, divided into four activities: cutting, $16,830; sewing, $35,890; setup, $76,584; and inspection, $32,000. Diva-nation manufactures two types of men’s pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows:

	Cutting	Sewing	Setup	Inspection
Jeans	810 dlh	1,245 dlh	1,215 setups	2,950 inspections
Khakis	1,170	800	970	2,050
	1,980 dlh	2,045 dlh	2,185 setups	5,000 inspections

Each product is budgeted for 16,000 units of production for the year.

Required:

Complete the Activity Tables for jeans and khakis.

A.	Determine the activity rates for each activity. Enter these rates in the Activity Rate columns.*
B.	Use the activity rates in (A) to determine the activity-based factory overhead per unit for each product.*

* When required, round all per-unit and activity rate answers to the nearest cent.

Answer 1

Solution A:

Computation of Activity rates
Activity cost pool	Overhead costs	Activity usage	Activity Rate
Cutting	$16,830	1980	$8.50	Per DLH
Sewing	$35,890	2045	$17.55	Per DLH
Setup	$76,584	2185	$35.05	per setup
Inspection	$32,000	5000	$6.40	per inspection

Solution B:

Computation of Overhead per unit
		Jeans		Khakis
Activity	Activity Rate	Activity usage	Overhead Allocated	Activity usage	Overhead Allocated
Cutting	$8.50	810	$6,885	1170	$9,945
Sewing	$17.55	1245	$21,850	800	$14,040
Setup	$35.05	1215	$42,586	970	$33,999
Inspection	$6.40	2950	$18,880	2050	$13,120
Total Cost assigned			$90,201		$71,104
/Units of Production			16000		16000
Overhead per unit			$5.64		$4.44