Casual Cuts Inc. has total estimated factory overhead for the year of $225,000, divided into four activities: cutting, $90,000; sewing, $22,500; setup, $80,000; and inspection, $32,500. Casual Cuts manufactures two types of men's pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows:
Cutting Sewing Setup Inspection
Jeans 500 dlh 1,000 dlh 250 setups 100 inspections
Khakis 1,000 500 750 400
1,500 dlh 1,500 dlh 1,000 setups 500 inspections
Each product is budgeted for 10,000 units of production for the year.
a. Determine the activity rates for each activity.
b. Determine the factory overhead cost per unit for each product, using activity-based costing.