Munoz Company produces commercial gardening equipment. Sinceproduction is highly automated, the company allocates its overheadcosts to product lines using activity-based costing. The costs andcost drivers associated with the four overhead activity cost poolsfollow:
| Activities |
| Unit Level | Batch Level | Product Level | Facility Level |
| Cost | $ | 72,900 | $ | 15,840 | $ | 11,000 | $ | 306,000 |
| Cost driver | 2,700 labor hrs. | 33 setups | Percentage of use | 17,000 units |
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Production of 860 sets of cutting shears, one of the company’s 20products, took 250 labor hours and 9 setups and consumed 20 percentof the product-sustaining activities.
Required
Had the company used labor hours as a company wide allocationbase, how much overhead would it have allocated to the cuttingshears?
How much overhead is allocated to the cutting shears usingactivity-based costing?
Compute the overhead cost per unit for cutting shears firstusing activity-based costing and then using direct labor hours forallocation if 860 units are produced. If direct product costs are$120 and the product is priced at 30 percent above cost for whatprice would the product sell under each allocation system?
Compute the overhead cost per unit for cutting shears firstusing activity-based costing and then using direct labor hours forallocation if 860 units are produced. If direct product costs are$120 and the product is priced at 30 percent above cost for whatprice would the product sell under each allocation system? (Roundintermediate calculations and final answers to 2 decimalplaces.)
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| | ABC | Labor Hrs | | Allocated overhead | | | | Direct cost | | | | Total cost per unit | | | | Desired profit | | | | Sales price | | |
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