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Question

EcoFabrics has budgeted overhead costs of $1,048,950. It has allocated overhead on

a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 499,500 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $399,600 and $649,350 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool

Cotton

Total

Machine hours111,000111,000 222,000. Number of setups1,110 555 1,665

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