Question

Activity-Based Costing

Maritime Marine Company has total estimated factory overhead for the year of $1,028,400, divided into four activities: fabrication, $444,800; assembly, $192,400; setup, $127,200; and inspection, $264,000. Maritime 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	1,000	dlh	1,700	dlh	40	setups	80	inspections
Bass boat	2,200		900		80		400
	3,200	dlh	2,600	dlh	120	setups	480	inspections

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

a. Determine the activity rates for each activity.

Fabrication	$ per dlh
Assembly	$ per dlh
Setup	$ per setup
Inspection	$ per inspection

b. Determine the factory overhead cost per unit for each product, using activity-based costing. If required, round to the nearest cent.

Speedboat	$
Bass boat	$

Answer 1

A,)

    Caclulation for Activity rates for each activity

	Total Estimated Overhead Cost	Total Estimated Activity		Activity Rate
	A	B		A/B
Fabrication	$444,800	3,200	DLH	$139	per DLH
Assembly	$192,400	2,600	DLH	$74	per DLH
Setup	$127,200	120	Setups	$1060	Per setup
Inspection	$264,000	480	Inspection	$550	per Inspection
	$1,028,400

B)     factory overhead cost per unit for each product

		Speedboat		Bass boat
	Activity Rate	Usage Quantities	Allocated Overhead	Usage Quantities	Allocated Overhead
	A	B	A*B	C	A*C
Fabrication	$139	1000	$139,000	2200	$305,800
Assembly	$74	1700	$125,800	900	$66,600
Setup	$1060	40	$42,400	80	$84,800
Inspection	$550	80	$44000	400	$220,000
Total Overhead			$351,200		$677,200
Production Units			200 Units		200 Units
Factory Overhead per unit = (total Overhead / Total Production Units)			$1756 ($351200/ 200)		$3386 ($677200/ 200)

Factory overhead per unit for Speed Boat	$1756
Factory overhead per unit for Bass boat	$3386