Plantwide, department, and activity-cost rates Tarquin's Trophies makes trophies, plaques, and medallions and operates at capacity. Tarquin does large custom orders, for example the participant trophies the Mishawaka Little League. The Controller has asked you to compare plantwide, department, and activity-based cost allocation.
The overhead cost for each department is:
Other information:
Materials handling and quality inspection costs vary with the number of batches processed in each department. The number of batches for each product line in each department is as follows:
Utilities costs vary with direct labor costs in each department.
1. Calculate the cost per unit of Trophies, Plaques and Medallions based on a single plantwide overhead rate, if total overhead is allocated based on total direct costs.
2. Calculate the cost per unit of Trophies, Plaques and Medallions based on departmental overhead rates, where forming department overhead costs are allocated based on direct labor costs of the forming department, assembly department overhead costs are allocated based on total direct costs of the assembly department and packaging department overhead costs are allocated based on direct materials costs of the packaging department.
3. Calculate the cost per unit of Trophies, Plaques and Medallions if Tarquin allocates overhead costs in each department using activity-based costing.
4. Explain how the disaggregation of information could improve or reduce decision quality.