Question

Doggie Pawz produces two models of dog beds: rectangle and circle. The following information about the costs to produce the company’s products has been provided.

Category	Estimated Cost	Cost Driver	Rectangle	Circle
Unit-Level	$293, 000	Labor Hours	200	300
Batch-Level	$45, 000	Inspections	19	15
Product-Level	$390,000	Storage Space	2900 sq. ft	3700 sq.ft
Facility-Level	$125,000	Machine Hours	4,000	7,000

a. If all costs are allocated based on machine hours, what is the rate per machine hour?

b. If all costs are allocated based on machine hours, what is the amount allocated to circle dog beds?

c. If ABC uses activity based costing based on the cost pools above, what is the rate for unit-level costs?

d. If ABC uses activity based costing based on the cost pools above, what is the rate for batch-level costs?

e. If ABC uses activity based costing based on the cost pools above, what is the rate for product-level costs?

f. If ABC uses activity based costing based on the cost pools above, what is the rate for facility-level costs?

g. If ABC uses activity based costing based on the cost pools above, what amount is allocated to rectangle beds?

Label and place your final answer for a-g at the top of the answer box. Then after the answer to g, label and show your work for each part of the question. Just show me numbers - that is usually enough for me to follow your logic.

Answer 1

1	If all costs are allocated based on machine hours, what is the rate per machine hour?
	Total Overheads cost ($293,000+$45,000+$390,000+$125,000)	$853,000
	Total machine hours (4,000+7,000)	11,000
Ans	Rate per machine hour ($853,000/11,000)	$77.545
2	If all costs are allocated based on machine hours, what is the amount allocated to circle dog beds?
	Machine hours for circle dog beds	7,000
	Rate per machine hour	$77.545
Ans	Amount allocated to circle dog beds (7,000*$77.545)	$542,818.18
3	If ABC uses activity based costing based on the cost pools above, what is the rate for each cost pool
	Category	Estimated cost	Cost driver	Cost driver activity total	Rate per cost pool
Ans	Unit level	$293,000	Labour hours	500	$586.00
Ans	Batch level	$45,000	Inspectors	34	$1,323.53
Ans	Product level	$390,000	Storage space	6,600	$59.09
Ans	Facility level	$125,000	Machine hours	11,000	$11.36
4	If ABC uses activity based costing based on the cost pools above, what amount is allocated to rectangle beds?
	Category	Rate per cost pool	Rectangle cost pool	Cost allocated
	Unit level	$586.00	200	$117,200.00
	Batch level	$1,323.53	19	$25,147.06
	Product level	$59.09	2900	$171,363.64
	Facility level	$11.36	4000	$45,454.55
Ans	Total			$359,165.24