Reference no: EM131584692

Question -

The expected production and sales are 1000 premium shoes and 20 000 budget shoes. Company management is concerned at the traditional overhead cost allocation system being used to cost overhead into the shoes and accumulated the following data from last year in order to conduct an activity-based costing overhead allocation:

Activity Allocation base Overhead cost

Purchasing Number of purchase orders $200 000

Stitching Metres stitched $100 000

Sales Number of sales orders $200 000

The numbers of activities for budget shoes and premium shoes are as follows:

Budget

Purchase orders 7000

Centimetres stitched 8000

Sales orders 8000

Premium

Purchase orders 3000

Centimetres stitched 2000

Sales orders 2000

Required -

a. Calculate the overhead rates for the following activities: purchasing, stitching and sales orders.

b. Calculate the dollar amount of overhead that should be assigned to a budget shoe and a premium shoe, under the ABC system.