Clover Manufacturing Company makes two products. The company’s budget includes $200,000 of overhead. 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 good shipped. The following is a summary of company information:

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.

Question

Clover Manufacturing Company makes two products. The company’s budget includes $200,000 of overhead. 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 good shipped. The following is a summary of company information:
  
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.

Quizplus · Accepted Answer

The Answer of Clover Manufacturing Company makes two products. The company’s budget includes $200,000 of overhead. 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 good shipped. The following is a summary of company information:
  
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.

Clover Manufacturing Company Makes Two Products