Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,314,700, divided into four activities: fabrication, $492,000; assembly, $220,000; setup, $325,950; and inspection, $276,750. 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	10,250	dlh	33,000	dlh	74	setups	128	inspections
Bass boat	30,750		11,000		541		897
	41,000	dlh	44,000	dlh	615	setups	1025	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

Solution:

Part 1 – Activity Rate for each activity

Activity Cost Pool	Estimated Overhead (A)	Estimated Use of Cost Drivers (B)		Activity-Based OH Rate (A / B)
Fabrication	$492,000	41000	Direct labor hour	$12.00	per direct labor hour
Assembly	$220,000	44000	Direct labor hour	$5.00	per direct labor hour
Setup	$325,950	615	Setups	$530.00	per setup
Inspection	$276,750	1025	Inspection	$270.00	per inspection
	$1,314,700

Part 2 – Factory Overhead Per Unit for each product

	Speedboat			Bass Boat
	Expected Usage	OH Rate	Assigned Overhead	Expected Usage	OH Rate	Assigned Overhead
Fabrication	10250	$12	$123,000	30750	$12	$369,000
Assembly	33000	$5	$165,000	11000	$5	$55,000
Setup	74	$530	$39,220	541	$530	$286,730
Inspection	128	$270	$34,560	897	$270	$242,190
Total Overhead Assigned			$361,780			$952,920
Budgeted Production Units			3,500 Units			3,500 Units
Overhead Per Unit (Total Overhead Assigned / Units)			$103			$272

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