Question

Coral Marine Company has total estimated factory overhead for the year of $2,055,000, divided into four activities: fabrication, $825,000; assembly, $270,000; setup, $536,000; and inspection, $424,000. Coral manufactures two types of boats: a speedboat and a bass boat. The activity-base usage quantities for each product by each activity are as follow:

Fabrication Assembly Setup
Inspection

Speedboat 1,200 dlh 1,800 dlh 60 setups 600 inspections
Bass Boat 1,800 1,200 100 setups
200

 3,000 dlh 3,000 dlh 160 setups 800 inspections

Each product is budgeted for 200 units of production for the year. Determine

(a) the activity rates for each activity

Answer 1

To calculate the activity rates for each activity in Coral Marine Company, divide the total estimated factory overhead by the activity-base usage quantities. The activity rates are $365 per dlh for fabrication, $180 per dlh for assembly, $4,400 per setup for setup, and $400 per inspection for inspection.

Step-by-step explanation:

To calculate the activity rates for each activity, we need to divide the total estimated factory overhead for the year by the activity-base usage quantities for each product by each activity. Let's calculate the activity rates for each activity:

1. Fabrication activity rate: $825,000 / (1,200 dlh for speedboat + 1,800 dlh for bass boat) = $365 per dlh
2. Assembly activity rate: $270,000 / (1,800 dlh for speedboat + 1,200 dlh for bass boat) = $180 per dlh
3. Setup activity rate: $536,000 / (60 setups for speedboat + 100 setups for bass boat) = $4,400 per setup
4. Inspection activity rate: $424,000 / (600 inspections for speedboat + 800 inspections for bass boat) = $400 per inspection