108. The Klamath Corp. produces two products, saws and drills. Three activities are used in their manufacture. These activities and their associated costs and bases are as follows:
machine hours
4,000
6,000
10,000
labor hours
7,000
13,000
20,000
number of setups
3
12
15
Units produced
500
600
Requirements:a) Determine the activity rate for each activity.b) Determine the overhead cost per unit for each product109. The Pikes Peak Leather Company manufactures leather handbags (H) and moccasins (M). The company has been using the factory overhead rate method but has decided to evaluate the activity based costing to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices.
Total Budgeted factory overhead cost = $360,000
Products
Cutting
Sewing
Set-Ups
QC Inspections
Purchase Orders
Handbags
60,000 dlh
200
100
Moccasins
40,000 dlh
80,000 dlh
300
800
Total
100,000 dlh
140,000 dlh
800 set-ups
1,000 inspect
400 PO’s
Budget
$40,000
$210,000
$80,000
$20,000
$10,000
Calculate the amount of factory overhead to be allocated to each unit using activity based costing. The factory plans to produce 60,000 handbags,and 40,000 moccasins.
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