Answer:
Using Traditional allocation method
Allocation rate per unit
= Budgeted overhead
Budgeted direct labour hours
Brass
Overhead allocation rate
= $47,500
700 hours
= $67.86 per direct labour hour
Gold
= $47,500
1,200 hours
= $39.58 per direct labour hour
Using activity-based costing
Brass
Allocation rate for material cost pool
= $12,500
400
= $31.25 per material moved
Gold
Allocation rate for material cost pool
= $12,500
100
= $125 per material moved
Brass
Allocation rate for machine set-up pool
= $35,000
400
= $87.50
Gold
Allocation rate for machine set-up pool
= $35,000
600
= $58.33
Step-by-step explanation:
Using traditional allocation method, the overheads for material cost pool and machine set-up pool will be added. The overhead allocation rate per unit is the division of total overhead by the direct labour hours for each product.
Using activity-based costing, the material cost pool overhead will be divided by the material moved for each product in order to obtain allocation rate for each product.
The allocation rate for machine set-up pool is obtained by dividing the machine set-up overhead by the number of machine set-up for each product.