Reference no: EM132501196
Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
Setting up equipment$440,000O
ther overheard$1,320,000
- Setting up equipment is based on setup hours, and other overhead is based on oven hours.
Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
Fudge Cookies
Units produced 8,000 445,000
Setup hours 8,800 2,200
Oven hours 1,000 7,000
Required:
Round your answers to the nearest whole dollar, unless otherwise directed.
Question 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
a. Setting up equipment$ per setup hourb. Other overhead$ per oven hour
Question 2. How much total overhead is assigned to Fudge using ABC?
Question 3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent.
Question 4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent.
Question 5. How much total overhead is assigned to Fudge using the plantwide overhead rate?
Question 6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non-ABC system because
Question 6b. What is the difference in total overhead assigned to fudge under the two methods?
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