Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $726,000, divided into four activity pools: fabrication,, $352,000; assembly, $132,000; setup, $132,000; and inspection, $110,000. 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	5,500	dlh	16,500	dlh	40	setups	69	inspections
Bass boat	16,500		5,500		290		481
	22,000	dlh	22,000	dlh	330	setups	550	inspections

Each product is budgeted for 3,500 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. The correct answer is:

Fabrication	$ 16 per direct labor hour
Assembly	$ 6 per direct labor hour
Setup	$ 400 per setup
Inspection	$ 200 per inspection

Note :

Activity Pools	Amount of Overhead	Total Activity		Activity Rates (Amount of Overhead / Total Activity )
Fabrication	352,000	22,000	Direct Labor Hour	16
Assembly	132,000	22,000	Direct Labor Hour	6
Setup	132,000	330	Setups	400
Inspection	110,000	550	Inspections	200

b.

The correct answer is :

Speedboat	$ 62 per unit
Bass boat	$ 145 per unit

Note :

1.

Speedboat
	Total Activity		Activity Rate	Total Cost ( Total Activity * Activity Rate)
Fabrication	5,500	dlh	16	88,000
Assembly	16,500	dlh	6	99,000
Setup	40	setups	400	16,000
Inspection	69	inspections	200	13,800
Total Cost				216,800
Total Units				3,500
Per Unit Cost ( Total Cost / Total Units)				62

2.

Bass boat
	Total Activity		Activity Rate	Total Cost ( Total Activity * Activity Rate)
Fabrication	16,500	dlh	16	264,000
Assembly	5,500	dlh	6	33,000
Setup	290	setups	400	116,000
Inspection	481	inspections	200	96,200
Total Cost				509,200
Total Units				3,500
Per Unit Cost ( Total Cost / Total Units)				145