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In: Accounting

Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently...

Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data.

Cost Driver Volume
Activity Cost Driver Cost Pencils Pens
Setting up Number of setups $ 72,000 20 30
Inspecting Number of parts 21,600 4 6
Packing and shipping Number of boxes shipped 43,200 45,000 75,000
Total overhead $ 136,800

Required:

a. Compute the amount of overhead to be allocated to each product under activity-based costing.

b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 45,000 boxes of pencils and 75,000 boxes of pens were produced during the period.

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Expert Solution

The answer has been presenetd in the supporting sheet. For detailed answer refer to the supporting sheet.

ekkarill92 answered 1 year ago
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