Winterland, Inc., produces two types of skis, downhill skis and cross country skis. Product and production information about the two items is shown below:

Required:

1. If Winterland uses the traditional two-stage method of allocating overhead costs based on direct labor hours, what is the amount of indirect costs per set of skis for each of the two types of skis?
2. If Winterland uses activity based costing, what is the total amount of indirect costs per set of skis for each of the two types of skis? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs based on the number of direct labor hours.

Question

Winterland, Inc., produces two types of skis, downhill skis and cross country skis. Product and production information about the two items is shown below:

Required:
 
 1. If Winterland uses the traditional two-stage method of allocating overhead costs based on direct labor hours, what is the amount of indirect costs per set of skis for each of the two types of skis?
 2. If Winterland uses activity based costing, what is the total amount of indirect costs per set of skis for each of the two types of skis? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs based on the number of direct labor hours.

Quizplus · Accepted Answer

The Answer of Winterland, Inc., produces two types of skis, downhill skis and cross country skis. Product and production information about the two items is shown below:

Required:
 
 1. If Winterland uses the traditional two-stage method of allocating overhead costs based on direct labor hours, what is the amount of indirect costs per set of skis for each of the two types of skis?
 2. If Winterland uses activity based costing, what is the total amount of indirect costs per set of skis for each of the two types of skis? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs based on the number of direct labor hours.