Activity-Based Costing and Product Cost Distortion Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department $186,000 Test and Pack Department 120,000 Total $306,000 The direct labor information for the production of 7,500 units of each product is as follows: Assembly Department Test and Pack Department Blender 750 dih 2.250 dih Toaster oven 2,250 750 Total 3.000 dih 3,000 dih Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Assembly Activity per dih Test and Pack Activity per dih Setup Activity per setup b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit Blender Toaster oven
Activity-Based Costing and Product Cost Distortion Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: Assembly Department $186,000 Test and Pack Department 120,000 Total $306,000 The direct labor information for the production of 7,500 units of each product is as follows: Assembly Department Test and Pack Department Blender 750 dih 2.250 dih Toaster oven 2,250 750 Total 3.000 dih 3,000 dih Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. The management of Four Finger Appliance Company has asked you to use activity-based costing to allocate factory overhead costs to the two products. You have determined that $81,000 of factory overhead from each of the production departments can be associated with setup activity ($162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. If required, round all per unit answers to the nearest cent. a. Determine the three activity rates (assembly, test and pack, and setup). Assembly Activity per dih Test and Pack Activity per dih Setup Activity per setup b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a). Product Total Factory Overhead Factory Overhead Cost Per Unit Blender Toaster oven
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 14E
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial & Managerial Accounting
Accounting
ISBN:
9781337119207
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial & Managerial Accounting
Accounting
ISBN:
9781337119207
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College