Question

The total factory overhead for Diva-nation is budgeted for the year at $169,465, divided into four activities: cutting, $18,130; sewing, $34,121; setup, $87,055; and inspection, $30,159. Diva-nation 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	785 dlh	1,215 dlh	1,240 setups	3,020 inspections
Khakis	1,175	810	1,030	1,965
	1,960 dlh	2,025 dlh	2,270 setups	4,985 inspections

Each product is budgeted for 20,000 units of production for the year.

	Required:
	Complete the Activity Tables for jeans and khakis. A. Determine the activity rates for each activity. Enter these rates in the Activity Rate columns.* B. Use the activity rates in (A) to determine the activity-based factory overhead per unit for each product.*
	* When required, round all per-unit and activity rate answers to the nearest cent.

Answer 1

Requirement a

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost	Expected Activity (B)	Activity rate (A/B)
Cutting	Number of DLHs	$ 18,130	1,960.00	$            9.25	Per DLH
Sewing	Number of DLHs	$ 34,121	2025	$          16.85	Per DLH
Setup	Number of Setups	$ 87,055	2270	$          38.35	Per Setup
Inspecting	Number of Inspections	$    30,159.00	4985	$            6.05	Per Inspection

Requirement b

	Total Activity cost	Activity Cost per unit
Jeans	$ 93,559	$                  4.68
Khakis	$ 75,906	$                  3.80

Working

Cost assigned to Jeans
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Cutting	$                       9.25	785	$ 7,261.25
Sewing	$                     16.85	1215	$ 20,472.60
Setup	$                     38.35	1240	$ 47,554.27
Inspecting	$                       6.05	3020	$ 18,270.85
Total Overheads assigned			$ 93,559
Production			20000
Overhead cost per unit			$               4.68

Cost assigned to Khakis
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Cutting	$                       9.25	1175	$ 10,868.75
Sewing	$                     16.85	810	$ 13,648.40
Setup	$                     38.35	1030	$ 39,500.73
Inspecting	$                       6.05	1965	$ 11,888.15
Total Overheads assigned			$ 75,906.03
Production			20,000.00
Overhead cost per unit			$               3.80