Question

Activity-Based Costing: Factory Overhead Costs The total factory overhead for Bardot Marine Company is budgeted for the year at $930,200, divided into four activities: fabrication, $420,000; assembly, $156,000; setup, $193,200; and inspection, $161,000. 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 7,000 dlh 19,500 dlh 50 setups 88 inspections Bass boat 21,000 6,500 370 612 28,000 dlh 26,000 dlh 420 setups 700 inspections Each product is budgeted for 6,000 units of production for the year. a. Determine the activity rates for each activity. Fabrication $ 15 per direct labor hour Assembly $ 6 per direct labor hour Setup $ 449.3 per setup Inspection $ 230 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

1. Computation of Activity Rate
ABC Costing
Activity	Overhead (A)	Cost Driver Quantity (B)		Allocation Rate A/B)
Fabrication	$420,000.00	28000	DLH	$15.00	Per DLH
Assembly	$156,000.00	26000	DLH	$6.00	Per DLH
Setup	$193,200.00	420	No. of Setup	$460.00	per Setup
Inspection	$161,000.00	700	No. of inspection	$230.00	Per inspection
Total	$930,200.00

2. Assigning Overhead Cost to Product Model
Using ABC Method
			SpeedBoat			Bassboat
	Activity Based Overhead Rate (A)		Cost Driver Incurred (B)		OH Allocated (AXB)	Cost Driver Incurred ( C)		OH Allocated (AXC)
Fabrication	$15.00	Per DLH	7000	Per DLH	$105,000.00	21000	Per DLH	$315,000.00
Assembly	$6.00	Per DLH	19500	Per DLH	$117,000.00	6500	Per DLH	$39,000.00
Setup	$460.00	per Setup	50	per Setup	$23,000.00	370	per Setup	$170,200.00
Inspection	$230.00	Per inspection	88	Per inspection	$20,240.00	612	Per inspection	$140,760.00
Total Overhead (A)					$265,240.00			$664,960.00
No. Of Units (B)					6000			6000
Overhead per Unit (A/B)					$44.21			$110.83