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blinkrb blinkrb
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Clover Manufacturing Company makes two products. Using the traditional allocation method, the company has allocated overhead based on estimated total direct labor cost of $125,000. Clover recently implemented an activity-based costing system and had determined that overhead can be broken into three overhead pools: cutting, machine setups, and shipping. The following is a summary of company information:

Estimated CostEstimated Activities
Cutting$  24,000500 cuts
Machine setups    8,000200 machine hours
Shipping   20,00040,000 shipments
​$52,000​

Required:

a.Calculate the company's overhead rate as a percentage of direct labor cost.
b.Calculate the company's overhead rates using the activity-based costing pools.
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
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jjwatsonjjwatson
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More solutions for this book are available here
a.$52,000 ÷ $125,000 = $0.416 per direct labor dollar
b.Cutting $24,000 ÷ 500 = $48 per cut
Setups$8,000 ÷ 200 = $40 per machine hour
Shipping$20,000 ÷ 40,000 = $0.50 per shipment
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Helped a lot
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