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Activity-based costing Casual Cuts Inc. has total estimated factory overhead for the year of $225,000, divided into four activities: cutting, $90,000; sewing, $22,500; setup, $80,000; and inspection, $32,500. Casual Cuts manufactures two types of men’s pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows: Cutting Sewing Setup Inspection Jeans 500 dlh 1,000 dlh 250 setups 100 inspections Khakis 1,000 500 750 400 1,500 dlh 1,500 dlh 1,000 setups 500 inspections Each product is budgeted for 10,000 units of production for the year. Determine (a) the activity rates for each activity and (b) the factory overhead cost per unit for each product, using activity-based costing.

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 25, Problem 25.9BPE
Textbook Problem

Activity-based costing

Casual Cuts Inc. has total estimated factory overhead for the year of $225,000, divided into four activities: cutting, $90,000; sewing, $22,500; setup, $80,000; and inspection, $32,500. Casual Cuts manufactures two types of men’s pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows:

  Cutting Sewing Setup Inspection
Jeans 500 dlh 1,000 dlh 250 setups 100 inspections
Khakis 1,000 500 750 400
  1,500 dlh 1,500 dlh 1,000 setups 500 inspections

Each product is budgeted for 10,000 units of production for the year. Determine (a) the activity rates for each activity and (b) the factory overhead cost per unit for each product, using activity-based costing.

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Chapter 25 Solutions

Accounting
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