Comparing ABC and Plantwide Overhead Cost Assignments
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
| Setting up equipment | $760,000 |
| Other overheard | $4,408,000 |
Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
| | Fudge | | Cookies |
| Units produced | 8,000 | | | 445,000 | |
| Setup hours | 15,200 | | | 3,800 | |
| Oven hours | 3,800 | | | 26,600 | |
Required:
Round your answers to the nearest whole dollar, unless otherwise directed.
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
| a. Setting up equipment | $fill in the blank 1 per setup hour |
| b. Other overhead | $fill in the blank 2 per oven hour |
2. How much total overhead is assigned to Fudge using ABC? $______________
3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $_____________per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent. $________per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate? $____________
6a. The difference in the total overhead assigned to Fudge is different under the ABC system and nonABC system because a. different treatment of setup costs b. difference in the units produced c. difference in the sale prices of the products or d. different oven temperatures required for baking fudge and cookies.
. 6b. What is the difference in total overhead assigned to fudge under the two methods?
$_____________
