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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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![Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based
costing system using the following data:
Cost Driver Volume
Pencils
23
Activity
Setting up
Inspecting
Packing and shipping
Cost Driver
Number of setups
Number of parts
Number of boxes shipped
Cost
Pens
$109,200
36,300
60,000
29
4
55,000
65,000
Total overhead
$205,500
Required:
a. Compute the amount of overhead to be allocated to each product under activity-based costing. (Do not round intermediate calculations.)
Overhead
Pencils
Pens
b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number
and that 55,000 boxes of pencils and 65,000 boxes of pens were produced during the period. (Do not round intermediate calculations.)
labor-hours required to assemble each box is 0.2 for pencils and 0.2 for pens
Overhead
Pencils
Pens](https://content.bartleby.com/qna-images/question/946d9c21-22e8-4c6b-b6c9-f437655c6d7b/63edac72-2742-4692-822a-a2e9b37e1b30/rmigssj_thumbnail.png)
Transcribed Image Text:Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based
costing system using the following data:
Cost Driver Volume
Pencils
23
Activity
Setting up
Inspecting
Packing and shipping
Cost Driver
Number of setups
Number of parts
Number of boxes shipped
Cost
Pens
$109,200
36,300
60,000
29
4
55,000
65,000
Total overhead
$205,500
Required:
a. Compute the amount of overhead to be allocated to each product under activity-based costing. (Do not round intermediate calculations.)
Overhead
Pencils
Pens
b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number
and that 55,000 boxes of pencils and 65,000 boxes of pens were produced during the period. (Do not round intermediate calculations.)
labor-hours required to assemble each box is 0.2 for pencils and 0.2 for pens
Overhead
Pencils
Pens
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