Activity-based costing versus traditional costing. Tree Corporation manufactures plywood and trim. Overhead costs are currently...
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Accounting
Activity-based costing versus traditional costing. Tree Corporation manufactures plywood and trim. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended using an activity-based costing system using the following data:
Activity
Cost Driver
Cost
Plywood
Trim
Production Setup
Number of Setups
$ 60,000
15
10
Material Handling
Number of Parts
$ 25,000
25
15
Packaging/Shipping
Number of Units Shipped
$ 30,000
40,000
60,000
Total
$ 115,000
a. Compute the amount of overhead allocated to each of the products (Plywood and Trim) under activity-based costing.
b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume labor-hours required to assemble each unit is .5 for Plywood and 1.0 for Trim, and 60,000 units of Plywood and 90,000 units of Trim, were produced.
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