Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows: 1 Assembly Department $275,736.00 2 Test and Pack Department 201,046.00 3 Total $476,782.00 The direct labor information for the production of 8,390 units of each product is as follows: Department Assembly Test and Pack Blender 740 dlh 2,040 dlh Toaster oven 2,205 680 Total 2,945 dlh 2,720 dlh Four Finger Appliance used direct labor hours to allocate production department factory overhead to products. The management of Four Finger Appliance Company has asked you to use activity-based costing instead of direct labor hours to allocate factory overhead costs to the two products. You have determined that $81,366 of factory overhead from each of the production departments can be associated with setup activity ($162,732 in total). Company records indicate that blenders required 142 setups, while the toaster ovens required only 49 setups. Each product has a production volume of 8,390 units. Required: Complete the Activity Tables for blenders and toaster ovens. a. Determine the three activity rates (assembly, test and pack, and setup).* b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a).* *If required, round all per-unit answers to the nearest cent.

Managerial Accounting

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 14E

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Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows:

1	Assembly Department	$275,736.00
2	Test and Pack Department	201,046.00
3	Total	$476,782.00

The direct labor information for the production of 8,390 units of each product is as follows:

	Department
	Assembly	Test and Pack
Blender	740 dlh	2,040 dlh
Toaster oven	2,205	680
Total	2,945 dlh	2,720 dlh

Four Finger Appliance used direct labor hours to allocate production department factory overhead to products.

The management of Four Finger Appliance Company has asked you to use activity-based costing instead of direct labor hours to allocate factory overhead costs to the two products. You have determined that $81,366 of factory overhead from each of the production departments can be associated with setup activity ($162,732 in total). Company records indicate that blenders required 142 setups, while the toaster ovens required only 49 setups. Each product has a production volume of 8,390 units.

Required:

Complete the Activity Tables for blenders and toaster ovens.

Determine the three activity rates (assembly, test and pack, and setup).*

Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a).*

*If required, round all per-unit answers to the nearest cent.

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