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 follows:

Fabrication Assembly Setup Inspection
Speedboat 1,200 dlh 1,800 dlh 60 setups 600 inspections
Bass boat 1,800 1,200 100 200
3,000 dlh 3,000 dlh 160 setups 800 inspections

Each product is budgeted for 200 units of production for the year.
Determine the activity rates for each activity.
Fabrication $ _____per dlh
Assembly $ _____per dlh
Setup $ _____per dlh
Inspection $ _____per inspection.

Answer 1

The activity rates for Coral Marine Company are $275 per dlh for fabrication, $90 per dlh for assembly, $3,350 per setup for setup, and $530 per inspection for inspection.

Step-by-step explanation:

The activity rates for each activity in the Coral Marine Company are calculated by dividing the total estimated factory overhead for the respective activity by the total driver units used in all products. The given activities and their estimated costs are fabrication ($825,000), assembly ($270,000), setup ($536,000), and inspection ($424,000). The total driver units for each activity such as direct labor hours (dlh) and number of setups/inspections have also been offered.

For fabrication, we have a total of 3,000 dlh (1,200 for speedboat + 1,800 for bass boat). We calculate the rate by dividing the total cost for fabrication by the total dlh:

Fabrication rate = $825,000 / 3,000 dlh = $275 per dlh

Similarly, for assembly, we have:

Assembly rate = $270,000 / 3,000 dlh = $90 per dlh

For setup, the total setups is 160 (60 for speedboat + 100 for bass boat). Therefore:

Setup rate = $536,000 / 160 setups = $3,350 per setup

Last, the total inspections are 800 (600 for speedboat + 200 for bass boat), so the inspection rate is calculated as:

Inspection rate = $424,000 / 800 inspections = $530 per inspection

These calculated rates are then used for allocating factory overhead costs to the products based on their activity consumptions.