EcoFabrics has budgeted overhead costs of $945,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $360,000 and $585,000 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool Cotton Total
Machine hours 100,000 100,000 200,000
Number of setups 1,000 500 1,500
1) Calculate the overhead rate using activity based costing.
2) Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.
3) Calculate the overhead rate using traditional approach.
4) What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?

Eco Fabrics

                                 Wool                           Cotton            Total

Cutting                 180,000                      180,000         360,000

Design             (585,000/1500)*1000

                                 390,000                    195,000      585,000

Total                    570,000                        375,000      945,000

Overhead Rate = Total Overhead Costs/ Direct Labor Hours= 945,000/ 450,000=  2.1

Overhead Rate for Wool = 570,000/225,000= 2.533

Overhead Rate for Cotton = 375,000/225,000= 1.667

Working:

                                       Cutting               Design

(cost driver is machine hours)          (cost driver is number of setups)

Overhead $360,000                               $585,000

                                    Wool         Cotton         Total

Machine hours        100,000        100,000      200,000

Number of setups    1,000              500            1,500

ans.

heterothermic organisms include those organisms that can switch between homeothermic (having body temperature higher than environment) and poikilothermic (having variation in internal body temperature) strategies.

some migratory birds show heterothermy as they decrease their metabolic rate during cold nights to keep their body temperature low. drop in metabolic rate allows increase in production efficiency of birds that reduces the internal body temperature to make it equal to external cold temperature during cold nights.

thus, the correct answer is 'birds allow their temperature drop in order to increase their production efficiency.'