Question

The Turtle Company has total estimated factory overhead for the year of $1,200,000, divided into four activities: fabrication, $600,000; assembly, $240,000; setup, $200,000; and materials handling, $160,000. Turtle manufactures two products, Boogie Boards and Surf Boards. The activity-base usage quantities for each product by each activity are as follows:

		Fabrication		Assembly		Setup		Materials Handling
Boogie Boards		10,000 dlh		30,000 dlh		60 setups		100 moves
Surf Boards		30,000		10,000		440		700
		40,000 dlh		40,000 dlh		500 setups		800 moves

Each product is budgeted for 10,000 units of production for the year. Determine the following:

a. The activity rates for each activity.

Fabrication	$ per dlh.
Assembly	$ per dlh.
Setup	$ per setup.
Materials Handling	$ per move.

b. The factory overhead cost per unit for each product using activity-based costing. Round your answers to two decimal places.

Factory overhead per unit for Boogie Board	$
Factory overhead per unit for Surf Board	$

Answer 1

Solution:

Part a --- Activity rates for each activity

	Total Estimated Overhead Cost	Total Estimated Activity		Activity Rate
	A	B		A/B
Fabrication	$600,000	40,000	Direct Labor Hour	$15.00	per DLH
Assembly	$240,000	40,000	Direct Labor Hour	$6.00	per DLH
Setup	$200,000	500	Setups	$400.00	Per setup
Materials Handling	$160,000	800	moves	$200.00	per move
	$1,200,000

Part b –

		Boogie Board		Surf Board
	Activity Rate	Usage Quantities	Allocated Overhead	Usage Quantities	Allocated Overhead
	A	B	A*B	C	A*C
Fabrication	$15.00	10000	$150,000	30000	$450,000
Assembly	$6.00	30000	$180,000	10000	$60,000
Setup	$400.00	60	$24,000	440	$176,000
Materials Handling	$200.00	100	$20,000	700	$140,000
Total Overhead			$374,000		$826,000
Production Units			10,000 Units		10,000 Units
Factory Overhead per unit (total Overhead / Total Production Units)			$37.40 ($374,000 / 10,000)		$82.60 ($826,000 / 10,000)

Factory overhead per unit for Boogie Board	$37.40
Factory overhead per unit for Surf Board	$82.60

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