Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,496,400, divided into four activities: fabrication, $814,000; assembly, $342,000; setup, $183,150; and inspection, $157,250. 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	9,250	dlh	28,500	dlh	67	setups	116	inspections
Bass boat	27,750		9,500		488		809
	37,000	dlh	38,000	dlh	555	setups	925	inspections

Each product is budgeted for 4,500 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
Bass boat	$ per unit

Answer 1

a. Computation of activity rates for each activity :-
Activities	Activity measures (Cost Drivers)	Estimated Overhead Cost	Expected Activity			Activity rate
			Speedboat	Bass boat	Total
a	b	c	d	e	f	g =c/f
Fabrication	Direct labor hours (DLHs)	$ 814,000	9,250	27,750	37,000	$22.00	per dlh
Assembly	Direct labor hours (DLHs)	$ 342,000	28,500	9,500	38,000	$9.00	per dlh
Setup	Setups	$ 183,150	67	488	555	$330.00	per setup
Inspection	inspections	$ 157,250	116	809	925	$170.00	per inspection
Total Manufacturing Overhead Cost		$ 1,496,400

b. Computation of Overhead Cost Per unit:-
	Overhead Assigned	Activity Driver			Activity rate	Total Overhead Cost
	a	b			c	d = b×c
	Speedboat
	Fabrication	9,250	Direct labor hours (DLHs)		$22.00	$ 203,500
	Assembly	28,500	Direct labor hours (DLHs)		$9.00	$ 256,500
	Setup	67	Setups		$330.00	$                   22,110
	Inspection	116	inspections		$170.00	$ 19,720
					Total	$                501,830
					Units Produced	4,500
					Overhead Cost per Unit	$                   111.52
	Bass boat
	Fabrication	27,750	Direct labor hours (DLHs)		$22.00	$ 610,500
	Assembly	9,500	Direct labor hours (DLHs)		$9.00	$ 85,500
	Setup	488	Setups		$330.00	$ 161,040
	Inspection	809	inspections		$170.00	$ 137,530
					Total	$                994,570
					Units Produced	4,500
					Overhead Cost per Unit	$ 221.02

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