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Isadores Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are...

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Accounting

Isadores Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data:

Activity Cost Driver Cost Pencils Pens
Setting up Number of setups $ 95,000 23 27
Inspecting Number of parts 24,800 3 5
Packing and shipping Number of boxes shipped 55,000 35,000 75,000
Total overhead $ 174,800

a. Compute the amount of overhead to be allocated to each product under activity-based costing.

Pencils

Pens

b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 35,000 boxes of pencils and 75,000 boxes of pens were produced during the period. (Do not round intermediate calculations.)

Pencils

Pens

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