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(Solution Download) Exercise 17-3 American Fabrics has budgeted overhead costs of $990,000. It has allocated overhead on


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise 17-3

 

American Fabrics has budgeted overhead costs of $990,000. It has

 

allocated overhead on a plantwide basis to its two products (wool

 

and cotton) using direct labor hours which are estimated to be

 

450,000 for the current year. The company has decided to experiment

 

with activity-based costing and has created two activity cost pools

 

and related activity cost drivers. These two cost pools are:

 

cutting (cost driver is machine hours) and design (cost driver is

 

number of setups). Overhead allocated to the cutting cost pool is

 

$360,000 and $630,000 is allocated to the design cost pool.

 

Additional information related to these pools is as follows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wool

 

 

Cotton

 

 

Total

 

Machine hours100,000100,000200,000
Number of setups1,0005001,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Correct answer.Your answer is correct.

 

Calculate the overhead rates for activity-based costing.

 

(Round answers to 2 decimal places, e.g.

 

$12.25.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overhead rates for activity-based costing
Cutting

 

$Entry field with correct answer

 

per machine hour
Design

 

$Entry field with correct answer

 

per setup

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHOW SOLUTION

 

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LINK TO TEXT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incorrect answer.Your answer is incorrect. Try again.

 

Determine the amount of overhead allocated to the wool product line

 

and the cotton product line using activity-based costing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wool product line

 

 

Cotton product line

 

Overhead Allocated

 

$Entry field with incorrect answer now contains modified data

 

 

$Entry field with incorrect answer now contains modified data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LINK TO TEXT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Correct answer.Your answer is correct.

 

Calculate the overhead rates using the traditional approach.

 

(Round answers to 2 decimal places, e.g.

 

$12.25.)

 

 

 

 

 

 

 

 

 

 

Overhead rates using the traditional

 

approach

 

$Entry field with correct answer

 

per direct labor hour

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHOW SOLUTION

 

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LINK TO TEXT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incorrect answer.Your answer is incorrect. Try again.

 

What amount of overhead would be allocated to the wool and cotton

 

product lines using the traditional approach, assuming direct labor

 

hours were incurred evenly between the wool and cotton?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wool product line

 

 

Cotton product line

 

Overhead Allocated

 

$Entry field with incorrect answer

 

 

$Entry field with incorrect answer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LINK TO TEXT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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