Reference no: EM13583394
Riverdale Printing Company prints limited edition art books with production runs of $15,000 to $100,000. It has recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to one product, Art of Design, and the ABC cost pools:
Art of Design:
Annual production $40,000 units
Direct material per unit $ 37
Direct labor per unit $ 8
Manufacturing overhead cost pools:
Cost Pool Cost Cost Driver
Material ordering $ 840,000 Number of purchase orders
Materials inspections $ 252,000 Number of receiving reports
Equipment setup $2,500,000 Number of setups
Quality control $1,000,000 Number of inspections
Other $25,000,000 Direct labor cost
Total manufacturing overhead $29,865,000
Annual activity information related to cost drivers:
Cost Pool All Books Art of Design
Materials ordering $120,000 orders 1,200
Materials inspection $ 2,100 receiving reports 315
Equipment setup 215 setups 1
Quality control 5,000 500
Other $12,500,000 direct labor $320,000
Required:
a.) Calculate the overhead rate per unit of activity for each of the five cost pools.
b.) Calculate the total overhead assigned to the production of the Art of Design. Round two decimal places.
c.) Calculate the overhead cost per unit for the Art of Design.
d.) Calculate the total unit cost for the Art of Design.
e.) Suppose that Riverdale Printing allocation base and one cost pool. Determine the overhead rate per direct labor dollar and the per unit overhead assigned to the Art of Design. Discuss the difference in cost allocation between traditional method and the activity-based costing approach.