Question

Activity-Based Costing: Factory Overhead Costs The total factory overhead for Bardot Marine Company is budgeted for the year at $1,228,500, divided into four activities: fabrication, $660,000; assembly, $288,000; setup, $153,000; and inspection, $127,500. 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 7,500 dlh 24,000 dlh 54 setups 94 inspections Bass boat 22,500 8,000 396 656 30,000 dih 32,000 dlh 450 setups 750 inspections Each product is budgeted for 7,500 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 per unit Bass boat

Answer 1

a. Activity rates for each activity = Factory overhead/ Activity - base usage

Fabrication = $660,000/30,000 dlh = $22 per direct labor hour

Assembly = $288,000/32,000 dlh = $9 per direct labor hour

Setup = $153,000/450 setups = $340 per setup

Inspection = $127,500/750 inspections = $170 per inspection

b. Factory overhead for speedboat = ($22 * 7,500 dlh) + ($9 * 24,000 dlh) + ($340 * 54 setups) + ($170 * 94 inspections) = $165,000 + $216,000 + $18,360 + $15,980 = $415,340

Factory overhead for Bass boat = ($22 * 22,500 dlh) + ($9 * 8,000 dlh) + ($340 * 396 setups) + ($170 * 656 inspections) = $495,000 + $72,000 + $134,640 + $111,520 = $813,160

Factory overhead per unit for speedboat = Factory overhead for speedboat/ Total units = $415,340/ 7,500 = $55.38 = $55

Factory overhead per unit for Bass boat = Factory overhead for Bass boat/ Total units = $813,160/ 7,500 = $108.42 = $108