(10)ABC: I need help on 3 & 4: Activity-Based And Department Rate Product Costing and Product Cost DistortionsBlack and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:Indirect labor$507,000Cutting Department156,000Finishing Department192,000Total$855,000The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:BudgetedActivityActivity CostActivity BaseProduction control$237,000Number of production runsMaterials handling270,000Number of movesTotal$507,000The activity-base usage quantities and units produced for the two products follow:Number ofDirect LaborDirect LaborProductionNumber ofHours-UnitsHours-CuttingRunsMovesFinishingProducedSnowboards4305,0004,0002,0006,000Skis702,5002,0004,0006,000Total5007,5006,0006,00012,000Required:1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is$315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.DepartmentProduction Department RateCutting Department52.50per direct labor hourFinishing Department90per direct labor hour 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent.ProductTotal Factory OverheadFactory Overhead Per UnitSnowboards$ 390,000$65Skis$ 465,000 v$77.50 V3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent.ActivityActivity RateProduction Control$per prod. runMaterials Handlingper moveCutting Departmentper dlhFinishing Department$per dlh4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.ProductTotal Activity CostActivity Cost Per UnitSnowboardsSkis5. Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.The activity-based overhead allocation reveals that snowboards vconsume more factory overhead on a per-unit basis than do skis v . Themultiple production department factory overhead rate vmethod does not show this because all factory overhead is assumed to be proportional to direct labor hours. The activity-based vmethodseparately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards aremade in smaller lots, representing a wide variety of styles. Thus, snowboards have higher activity costs per unit than skis.

Since you have specifically asked for part 3 and 4 so we have solved the same for you.

Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Budgeted Activity Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Direct Labor Direct Labor Production Number of Hours- Units Hours-Cutting Runs Moves Finishing Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the to $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Production Department Rate Cutting Department 52.50 V per direct labor hour Cinichin g Donartmont 90 V ner direct labor hour

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3PA: Activity-based and department rate product costing and product cost distortions Black and Blue...