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Question(s) / Instruction(s):

All Wood Corporation manufactures dining chairs and tables. The following information is available:

Dining ChairsTablesTotal ActivityTotal CostMachine setups200 600 800 $36,000Inspections250 470 720 54,000$ Labor hours2,600 2,400 5,000 N/A

All Wood is considering switching from one overhead rate based on labor hours to activity-based costing.

Instructions

Perform the following analyses for these two components of overhead (show computations):

a. Compute total machine setups and inspection costs assigned to each product, using a single overhead rate.

b. Compute total machine setups and inspection costs assigned to each product, using activity-based costing.

c. Comment on the difference between the amounts of overhead costs allocated to each product under the two methods.

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