EcoFabrics has budgeted overhead costs of $1,077,300. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 513,000 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 $410,400 and $666,900 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool Cotten Total
Machine hours 114,000 114,000 228,000
No of Setups 1,140 570 1710
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
$EcoFabrics has budgeted overhead costs of $1,077,3
per machine hour
Design
$EcoFabrics has budgeted overhead costs of $1,077,3
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
$EcoFabrics has budgeted overhead costs of $1,077,3
$EcoFabrics has budgeted overhead costs of $1,077,3
Calculate the overhead rate using traditional approach. (Round answer to 2 decimal places, e. g. 12.25.)
Overhead rates using the traditional approach
$EcoFabrics has budgeted overhead costs of $1,077,3
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
$EcoFabrics has budgeted overhead costs of $1,077,3
$EcoFabrics has budgeted overhead costs of $1,077,3

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