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Question - Health Food Company produces two exclusive products: food package to lose weight and food package to stabilize weight. The company has the following actual and budgeted data:
Budgeted overhead $360,000
Expected activity (DLH) 100,000 Actual activity (DLH) 100,000
Actual overhead $380,000
Food package to lose weight
Food package to stabilize weight
Units produced
10,000
100,000
Prime costs
78,000
738,000
Direct labor hours
90,000
Required -
1. Calculate the pre-determined overhead rate?
2. What is your opinion if Health food company use Activity based costing (ABC)? Is it possible? Please explain by providing illustrations of the activities, cost drivers, and calculations!
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