FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
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Comparing ABC and Plantwide
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
| Setting up equipment | $270,000 |
| Other overheard | $2,304,000 |
Setting up equipment is based on setup hours, and other overhead is based on oven hours.
Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
| Fudge | Cookies | ||||
| Units produced | 8,000 | 445,000 | |||
| Setup hours | 4,000 | 1,000 | |||
| Oven hours | 1,800 | 12,600 |
Required:
Round your answers to the nearest whole dollar, unless otherwise directed.
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
| a. Setting up equipment | $ per setup hour |
| b. Other overhead | $ per oven hour |
2. How much total overhead is assigned to Fudge using ABC?
$
3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent.
$per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent.
$ per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate?
$
6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non–ABC system because different treatment of setup costs. .
6b. What is the difference in total overhead assigned to fudge under the two methods?
$
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