Chapter 26 - 1-126-126Cost Allocation and Activity-Based...

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Unformatted text preview: 1-126-126Cost Allocation and Activity-Based CostingStudent Version1-226-21Identify three methods used for allocating factory overhead costs to products.26-21-326-3Most companies have accounting systems that trace revenues to individual product lines. In addition, they need to subtract the cost of manufacturing their product from revenues in order to determine the profit from sales. Determining the cost of the product is termed product costing. Product Costing11-426-4Product Costing Allocation Methods11-526-52Use a single plantwide factory overhead rate for product costing.26-51-626-6Ruiz Company IllustrationRuiz Company manufactures two products, snowmobiles and lawnmowers. Both products are manufactured in a single factory. There is $1,600,000 of factory overhead budgeted for the period.21-726-72Ruiz Company IllustrationEach product is budgeted 10,000 direct labor hours as shown below:1-826-8Total budgeted factory overhead costsTotal budgeted plantwide allocation baseComputing Single Plantwide Factory Overhead$80 per direct labor hour=$1,600,00020,000 direct labor hours(1,000 10 dlh) + (1,000 10 dlh)21-926-9Snowmobile:$80 per dlh 10 direct labor hours = $800Lawnmower:...
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Chapter 26 - 1-126-126Cost Allocation and Activity-Based...

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