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cody1097
cody1097
18.06.2020 • 
Business

WoolCorp buys sheep’s wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You’ve just been hired as a production manager at WoolCorp. Currently WoolCorp makes two products: (1) raw, clean wool to be used as stuffing or insulation and (2) wool yarn for use in the textile industry. The company would like you to evaluate its costing methods for its raw wool and wool yarn.

WoolCorp is currently using the single plantwide factory overhead rate method, which uses a predetermined overhead rate based on an estimated allocation base such as direct labor hours or machine hours. The rate is computed as follows:

Single Plantwide Factory Overhead Rate = (Total Budgeted Factory Overhead) ÷ (Total Budgeted Plantwide Allocation Base)
WoolCorp has been using combing machine hours as its allocation base.
The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WoolCorp’s current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 450 pounds of either raw wool or wool yarn:

Factory Overhead Type Budgeted Factory Overhead
Sorting $25,600
Cleaning 38,400
Combing 1,300

Raw Wool Wool Yarn
Hours of combing machine use required 80 20

In the following table, use combing machine hours as the allocation base for assigning overhead costs to each product. When required, round your answers to the nearest dollar.

Raw Wool Wool Yarn
Allocated factory overhead cost $ $

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