Question

Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats.

Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers per Activity
Designing $448,260 12,400 designer hours
Sizing and cutting 4,009,050 151,000 machine hours
Stitching and trimming 1,419,075 79,500 labor hours
Wrapping and packing 299,250 31,500 finished units

Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools.

a. Designing
b. Sizing and cutting
c. Stitching and trimming
d. Wrapping and packing

Answer 1

Answer and Explanation:

The computation of the activity based overhead rate is shown below:

= Estimated overhead ÷ cost driver per activity

a. For designing

= $448,260 ÷ 12,400

= $36.15 per design hour

b. For sizing and cutting

= $4,009,050 ÷ 151,000

= $26.55 per machine hour

c. For stiching and trimming

= $1,419,075 ÷ 79,500

= $17.85 per labor hour

d. For wrapping and packing

= $299,250 ÷ 31,500

= $9.5 per finished units