Question

Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC:

	Brass		Gold
Units Planed	800		125
Material Moves	400		100
Machine Setups	300		450
Direct Labor Hours	600		1,300

The estimated overhead for the material cost pool is estimated as $11,500, and the estimate for the machine setup pool is $26,250.

A. Calculate the allocation rate per unit of brass and per unit of gold using the traditional method? Round intermediate calculations and final answers to two decimal places.

	Allocation Rate per Unit
Brass	$
Gold	$

B. Calculate the allocation rate per unit of brass and per unit of gold using the activity-based costing method? Round intermediate calculations and final answers to two decimal places.

	Allocation Rate per Unit
Brass	$
Gold	$

Answer 1

	Brass	Gold	Total
Material Moves	400	100	500
Machine setup	300	450	750
Direct labor hours	600	1300	1900

A. Traditional method
Total estimated overhead cost = 11500 + 26250	37750

	Brass	Gold
Overhead allocated	11921 [ 37750*600/1900 ]	25829 [ 37750*1300/1900 ]
(/) Units planned	800	125
Allocation rate per unit	14.90	206.63

B. Activity-based costing :
	Activity rate
Material cost pool [ 11500 / 500 ]	23
Machine setup pool [ 26250 / 750 ]	35

Overhead allocation :	Brass	Gold
Materials cost pool [ Materials move * Activity rate ]	9200	2300
Machine setup pool [ Machine setups * Activity rate ]	10500	15750
Total overhead allocated	19700	18050
(/) Units planned	800	125
Allocation rate per unit	24.63	144.40