2. Spiro Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow.
Activities
Unit Level Batch Level Product Level Facility Level
Cost $57,200 $17,860 $12,000 $221,000
Cost driver 2,600 labor hrs. 38 setups Percentage of use 17,000 units
Production of 730 sets of cutting shears, one of the company's 20 products, took 210 labor hours and 10 setups and consumed 10 percent of the product-sustaining activities.
Required:
a. Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? (Round intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)
b. How much overhead is allocated to the cutting shears using activity-based costing? (Round your answer to the nearest dollar amount.)
Allocated cost
c. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 730 units are produced. If direct product costs are $190 and the product is priced at 35 percent above cost, for what price would the product sell under each allocation system? (Round intermediate calculations and final answers to 2 decimal places.
ABC Labor Hrs
Allocated overhead is
direct cost
total cost per unit
desired profit
sales price
3. Gerald Boards produces two kinds of skateboards. Selected unit data for the two boards for the last quarter follow.
Basco Boards Shimano Boards
Production costs
Direct materials $ 24.6 $ 37.20
Direct labor $ 30.60 $ 52.20
Allocated overhead $ 15.30 $ 19.20
Total units produced and sold 4,600 8,600
Total sales revenue $ 400,200 $ 1,083,600
Gerald allocates production overhead using activity-based costing. It allocates delivery expense and sales commissions, which amount to $57,000 per quarter, to the two products equally.
Required:
a. Compute the per-unit cost for each product. (Round your answers to 2 decimal places.) Basco Boards Shimano boards cost per unit
Basco Boards Shimano Boards
cost per unit
b. Compute the profit for each product. Basco Boards shimano boards profit
Basco Boards Shimano Boards