American fabrics has budgeted overhead costs of 1308780 it, Ask an Expert

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American Fabrics has budgeted overhead costs of $1,308,780. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 594,900 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 $475,920 and $832,860 is allocated to the Design cost pool. Additional information related to these pools is as follows.

	Wool	Cotton	Total
Machine hours	132,200	132,200	264,400
Number of setups	1,322	661	1,983

(a1)

Calculate the overhead rates for activity-based costing & using the traditional approach. (Round answers to 2 decimal places, e.g. $12.25.)

Overhead rates for activity-based costing
Cutting	$	per machine hour
Design	$	per setup

Overhead rates using the traditional approach	$	per direct labor hour

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9946181

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