Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,345,650, divided into four activities: fabrication, $627,000; assembly, $288,000; setup, $232,650; and inspection, $198,000. 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	8,250	dlh	27,000	dlh	59	setups	103	inspections
Bass boat	24,750		9,000		436		722
	33,000	dlh	36,000	dlh	495	setups	825	inspections

Each product is budgeted for 2,500 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

Calculation of activity rates for each activity. Answer- Activity Cost Pools Fabrication Assembly Setup Inspection Total overhead cost Activity Rate 19.00 $ per direct labor hour 8.00 $ per direct labor hour 470.00 $ per setup 240.00 S per inspection Computation of Overhead Rate for Each Activity Pool Amounts in $ Working Note Activity Pools Fabrication Assembly Setup Inspection Total overhead cost Cost Driver Number ofdirect labor Number ofdirect labor Number of setup Number of inspection Cost Pools Total 6270001 288000 232650 198000 1345650 Activity Base 33000 36000 495 825 19.00 $ per direct labor hour 8.00 S per direct labor hour 470.00 $ per setup 240.00 $ per inspection

Calculation activity-based factory overhead per unit for each product Answer- Speedboat Bass boat $170 per unit S368 per unit Working Note- Allocation of Overhead cost to each Product Activity Speedboat Bass boat Fabrication Assembly Setup Inspection Total overhead cost = (8250* 19) (27000*8) (59*470) (103*240) 1,56,750 (24750*19) 2,16,000 (9000*8) 27,730 (436*470) 24,720 (722*240) 4,25,200 4,70,250 72,000 2,04,920 1,73,280 9,20,450 Total Allocation Overhead Cost Speedboat Bass boat Total cost 4,25,200 9,20,450 13,45,650 The activity-based factory overhead per unit for each product are as - Per Unit Overhead= Total Allocated Overhead / No. of units For Speedboat, Per Unit Overhead = $425200 / 2500 = $170. per unit For Bassboat, Per Unit Overhead = $920450 / 2500 =$368. per unit