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Question: performance gloves inc produces three sizes of sports gloves small...

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Performance Gloves, Inc. produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Performance Gloves uses the multiple production department factory overhead rate method of allocating factory overhead costs. Its factory overhead costs were budgeted as follows:

Pattern Department overhead $170,000
Cut and Sew Department overhead 279,000
Total $449,000

The direct labor estimated for each production department was as follows:

Pattern Department 2,500 direct labor hours
Cut and Sew Department 3,100
Total 5,600 direct labor hours

Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows:

Production Departments Small Glove Medium Glove Large Glove
Pattern Department 0.04 0.05 0.06
Cut and Sew Department 0.07 0.09 0.11
Direct labor hours per unit 0.11 0.14 0.17

If required, round all per unit answers to the nearest cent.

a. Determine the two production department factory overhead rates.

Pattern Department $per dlh
Cut and Sew Department $per dlh

b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

Small glove $ per unit
Medium glove $ per unit
Large glove $ per unit

Atlas Enterprises Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

Activity Activity Rate
Fabrication $27 per machine hour
Assembly $13 per direct labor hour
Setup $49 per setup
Inspecting $26 per inspection
Production scheduling $14 per production order
Purchasing $11 per purchase order

The activity-base usage quantities and units produced for each product were as follows:

Activity Base Elliptical Machines Treadmill
Machine hours 1,786 1,054
Direct labor hours 393 153
Setups 61 19
Inspections 642 385
Production orders 77 15
Purchase orders 215 131
Units produced 298 200

Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

Total Activity Cost Activity Cost Per Unit
Elliptical Machines $ $
Treadmill $ $

Activity-Based Costing and Product Cost Distortion

Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is budgeted to be $672,000.

Time records from indirect labor employees revealed that they spent 60% of their time setting up production runs and 40% of their time supporting actual production.

The following information about cell phones and tablet PCs was determined from the corporate records:

Number of
Direct Labor
Cell phones 1,600 2,000 80,000
Tablet PCs 800 2,000 80,000
Total 2,400 4,000 160,000

If required, round your answers to the nearest cent.

a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base.

Cell phones $ per unit
Tablet PCs $ per unit

b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities—one for setup and the other for production support.

Budgeted Activity Cost Activity Rate
Setup $ $ per setup
Production support $ $ per direct labor hour

c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.

Cell phones $ per unit
Tablet PCs $ per unit

Single Plantwide Factory Overhead Rate

Mozart Music Inc. makes three musical instruments: trumpets, tubas, and trombones. The budgeted factory overhead cost is $133,200. Factory overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit:

Budgeted Production Volume Direct Labor Hours Per Unit
Trumpets 3,100 units 0.8
Tubas 400 1.6
Trombones 1,200 1.1

If required, round all per unit answers to the nearest cent.

a. Determine the single plantwide factory overhead rate.
$ per direct labor hour

b. Use the factory overhead rate in (a) to determine the amount of total and per-unit factory overhead allocated to each of the three products.

Factory Overhead Cost
Per Unit
Factory Overhead Cost
Trumpets $ $
Total $

Product Costs using Activity Rates

Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is $194,400, and 16,200 orders are estimated to be processed.

a. Determine the activity rate of the sales order processing activity.
$ per sales order

b. Determine the amount of sales order processing cost that Nozama.com would receive if it had 9,200 sales orders.

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