Question

Fine Industries uses activity-based costing to assist management in setting prices for the company's three major product lines. The following information is available: Activity Cost Pool Estimated Overhead Expected Use of Cost Driver per Activity Cutting 900,000 25,000 labor hours Stitching 8,000,000 320,000 machine hours Inspections 2,800,000 160,000 labor hours Packing 800,000 64,000 finished goods units.

Compute the activity-based overhead rates.

Answer 1

Cutting 36 per Labor Hour

Stitching 25 per machine hour

Inspections 17.5 per labor hour

Packing 12.5 per finished good

Step-by-step explanation:

cost/ cost driver = rate

Cutting Cost 900,000 / 25,000 labor hours = 36 Rate/DLH

Stitching Cost 8,000,000 / 320,000 machine hours = 25 rate/MH

Inspections Cost 2,800,000 / 160,000 labour hours = 17.5 rate/ DLH

Packing Cost 800,000 / 64,000 finished goods = 12.5 rate/FG