Question

Coronado has budgeted overhead costs of $1,134,000. It has allocated overhead on a plantwide basis to...

Coronado has budgeted overhead costs of $1,134,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 540,000 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 $432,000 and $702,000 is allocated to the design cost pool. Additional information related to these pools is as follows.

Wool

Cotton

Total

Machine hours

120,000 120,000 240,000

Number of setups

1,200 600 1,800

(a1)

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

$enter a dollar amount per machine hour rounded to 2 decimal places

per machine hour

Design

$enter a dollar amount per setup rounded to 2 decimal places

per setup

Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.

Wool product line

Cotton product line

Overhead 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 hour

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 product line

Cotton product line

Overhead Allocated

$

$

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