Wilkins Inc. has two types of handbags: standard and custom

$9.00

Description

Wilkins Inc. has two types of handbags: standard and custom. The
controller has decided to use a plantwide overhead rate based on direct
labor costs. The president has heard of activity-based costing and wants
to see how the results would differ if this system were used. Two
activity cost pools were developed: machining and machine setup.
Presented below is information related to the company’s operations.

Standard Custom
Direct labor costs $52,400 $116,000
Machine hours 1,410 1,210
Setup hours 98 380

Total
estimated overhead costs are $301,800. Overhead cost allocated to the
machining activity cost pool is $195,400, and $106,400 is allocated to
the machine setup activity cost pool.

Instructions
(a) Compute the overhead rate using the traditional (plantwide) approach.
(b) Compute the overhead rates using the activity-based costing approach.
(c) Determine the difference in allocation between the two approaches.

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Wilkins Inc. has two types of handbags: standard and custom

$11.00

Description

Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
Direct labor costs standard are $55,500, 1150 machine hours, and 100 setup hours. Direct labor costs custom are $97,200, 1270 machine hours, and 380 setup hours.
.:.
Total estimated overhead costs are $304,000. Overhead cost allocated to the machining activity cost pool is $195300, and $108700 is allocated to the machine setup activity cost pool.

Instructions
(a) Compute the overhead rate using the traditional (plantwide) approach.
(b) Compute the overhead rates using the activity-based costing approach.
(c) Determine the difference in allocation between the two approaches.

Reviews

There are no reviews yet.

Be the first to review “Wilkins Inc. has two types of handbags: standard and custom”

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