Homework-Chapter-9.docx - Homework Chapter 9 Activity-Based...

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Homework Chapter 9 - Activity-Based Costing 1. Why do companies commonly use direct labor-hours or direct labor cost but not the number of units to allocate overhead? 2. Plant wide versus Department Allocation Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows: Required: a. Compute the profit for each product using plantwide allocation. b. Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. Shle asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have

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