FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
| 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 | dlh | 2,250 | dlh | ||||||
| Toaster oven | 2,250 | 750 | ||||||||
| Total | 3,000 | dlh | 3,000 | dlh |
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 dlh |
| Test and Pack Activity | $ per dlh |
| 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 | |
| Blender | $ | $ |
| Toaster oven | $ | $ |
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