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 $455,000 14,000 designer hours
Sizing and cutting 3,948,000 168,000 machine hours
Stitching and trimming 1,479,725 78,500 labor hours
Wrapping and packing 333,000 30,000 finished units
Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools.
Activity-based overhead rates
Designing $ per designer hour
Sizing and cutting $ per machine hour
Stitching and trimming $ per labor hour
Wrapping and packing $ per finished unit

Answer 1

Designing = $32.50 per designer hour

Sizing and cutting = $23.50 per machine hour

Stitching and trimming = $18.85 per labor hour

Wrapping and packing = $11.10 per finished unit

Step-by-step explanation:

The Activity Based Overhead Costing involves calculation of cost driver rate for each activity center.

Cost Driver Rate = Cost of Activity / Number of Times that Activity is Performed

Designing = $455,000 / 14,000

= $32.50

Sizing and cutting = $3,948,000 / 168,000

= $23.50

Stitching and trimming = $1,479,725 / 78,500

= $18.85

Wrapping and packing = $333,000 / 30,000

= $11.10