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 |
|
$42,700 |
|
$106,000 |
| Machine hours |
|
1,290 |
|
1,180 |
| Setup hours |
|
100 |
|
380 |
Total estimated overhead costs are $307,600. Overhead cost allocated to the machining activity cost pool is $196,000, and $111,600 is allocated to the machine setup activity cost pool.
0 comments