Daher Corporation manufactures two products: Product A34R and Product E05V. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products A34R and E05V.?Activity Cost PoolActivity MeasureTotal CostTotal Activity?MachiningMachine-hours$95,0005,000MHs?Machine setupsNumber of setups$80,000200setups?Product designNumber of products$96,0002products?General factoryDirect labor-hours$310,00010,000DLHs?Activity MeasureProduct A34RProduct E05V?Machine-hours2,0003,000?Number of setups15050?Number of products11?Direct
labor-hours3,0007,000Required:a. What is the company's plantwide overhead rate?b. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product E05V?c. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product A34R?
What will be an ideal response?
a. The company's plantwide overhead rate is computed as follows:
| ? | Machining | $95,000 | ? |
| ? | Machine setups | 80,000 | ? |
| ? | Product design | 96,000 | ? |
| ? | General factory | 310,000 | ? |
| ? | Total estimated overhead cost (a) | $581,000 | ? |
| ? | Total expected direct labor-hours (b) | 10,000 | DLHs |
| ? | Predetermined overhead rate (a) ÷ (b) | $58.10 | per DLH |
b. Using the plantwide overhead rate, the manufacturing overhead cost that would be allocated to Product E05V is computed as follows:
| ? | ? | Product E05V |
| ? | Total direct labor hours (a) | 7,000 |
| ? | Plantwide overhead rate per DLH (b) | $58.10 |
| ? | Manufacturing overhead assigned (a) × (b) | $406,700 |
c. Using the plantwide overhead rate, the manufacturing overhead cost that would be allocated to Product A34R is computed as follows:
| ? | ? | Product A34R |
| ? | Total direct labor hours (a) | 3,000 |
| ? | Plantwide overhead rate per DLH (b) | $58.10 |
| ? | Manufacturing overhead assigned (a) × (b) | $174,300 |
The percentage of the total overhead cost allocated to Product A34R is computed as follows:
| ? | Manufacturing overhead cost assigned to Product A34R (a) | $174,300 |
| ? | Total manufacturing overhead cost (b) | $581,000 |
| ? | Percentage of total manufacturing overhead cost assigned to Product A34R (a) ÷ (b) | 30.00% |
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