Whirlpool Corporation Conducted An Activitybased Costing Study Of Its Evansville

Whirlpool Corporation conducted an activity-based costing study of its Evansville, Indiana, plant in Order to identity its most profitable products. Assume that we select three representative refrigerators (out of 333): One low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators:

Whirlpool Corporation conducted an activity-based costing study of its Evansville,

Prior to conducting the study, the factory over head allocation was based on single machine hour rate. The machine hour rate was $180 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows:

Whirlpool Corporation conducted an activity-based costing study of its Evansville,

(a) Complete the following table, using the single machine hour rate to determine the per unit factory overhead for each refrigerator ( Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit overhead to nearest cent and whole percents to one decimal place.

Whirlpool Corporation conducted an activity-based costing study of its Evansville,

(b) Why is the traditional overhead rate per machine hour greater under the single rate method than under the activity-based method?
(c) Interpret Column C in your table from part (a)

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