Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,039,600, divided into four activity pools: fabrication,, $448,000; assembly, $180,000; setup, $222,600; and inspection, $189,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The activity-base usage quantities for each product by each activity are as follows:
Fabrication Assembly Setup Inspection
Speedboat 7,000 dlh 22,500 dlh 50 setups 88 inspections
Bass boat 21,000 7,500 370 612
28,000 dlh 30,000 dlh 420 setups 700 inspections
Each product is budgeted for 5,000 units of production for the year.
a. Determine the activity rates for each activity.
Fabrication $ per direct labor hour
Assembly $ per direct labor hour
Setup $ per setup
Inspection $ per inspection
b. Determine the activity-based factory overhead per unit for each product. Round to the nearest whole dollar.
Speedboat $ per unit
Bass boat $ per unit

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Estimated factory overhead:

fabrication, $448,000

assembly, $180,000

setup, $222,600

inspection, $189,000

Fabrication Assembly Setup Inspection

Speedboat 7,000 dlh 22,500 dlh 50 setups 88 inspections

Bass boat 21,000 7,500 370 612

28,000 dlh 30,000 dlh 420 setups 700 inspections

Each product is budgeted for 5,000 units of production for the year.

First, we need to calculate the predetermined overhead rate for each activity using the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

fabrication= 448,000/28,000= $16 per direct labor hour

assembly= 180,000/30,000= $6 per direct labor hour

setup= 222,600/420= $530 per setup

inspection= 189,000/700= $270 per inspection

Now, we can allocate overhead to each product line:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Speed boat:

Allocated MOH= 7,000*16 + 22,500*6 + 50*530 + 88*270= $297,260

Bass boat:

Allocated MOH= 21,000*16 + 7,500*6 + 370*530 + 612*270= $742,340

Finally, the unitary overhead cost:

Speed boat= 297,260/5,000= $59.45

Bass boat= 742,340/5,000= $148.47