Question

Sand Castle Manufacturing produces concrete yard art. 2,600 concrete seahorses were produced in a recent production run. The run required 1,300 machine hours, and also required 6 "set-ups" of mixing equipment. Final inspection required 60 hours of inspection activity. Estimated overhead is estimated at $40 per machine hour, plus $2,800 per "set-up" and $30 per inspection hour. Direct materials and direct labor total $80 per seahorse.

(a) Apply activity-based costing and determine the amount assigned to a concrete seahorse.

A.
Amount assigned to a concrete seahorse

114.15

B.
Amount assigned to a concrete seahorse

125.15

C.
Amount assigned to a concrete seahorse

96.15

D.
Amount assigned to a concrete seahorse

107.15

E.
Amount assigned to a concrete seahorse

98.15

Answer 1

D) $107.15

Step-by-step explanation:

The amount of overhead to be assigned to concrete seahorse can be determined by multiplying the activity overheard rate by the amount of cost drivers consumed by the sea horse.

This will be done as follow:

Machine cost = 1300× 40 =52000

Set -up cost = 6 × 2800 =16800

Inspection cost = 60×30 =1800

Total overheard = 52000+16800+1800= 70600

Overhead cost per seahorse = 70,600/ 2600= 27.153

The total cost per seahorse = Direct material and labour cost + overhead

= $80 + $27.15=$107.15

Amount assigned to a seahorse=$107.15

Set -