Question

Applying overhead using activity based costing for the following 2 models of boats Cost Driver                          &nbsp

Applying overhead using activity based costing for the following 2 models of boats

Cost Driver                                   Annual Cost          Total Activity

Production order set-up                  $147,600               4,800 set-ups

Raw Material ordering                   $216,800                8,000 items ordered

Product cleaning                          $1,680,200                   775 inspection approvals

Equipment usage                          $948,500              12,500 machine hours

Cost Driver                                    Activity Required                  Activity Required

                                                      Viking-star  (117 units)           Lion-star (86 units)

Production order set-up                  1,084 set-ups                     976 set-ups

Raw Material ordering                    2,050 items ordered            3,690 items ordered

Product cleaning                             201 inspec. app                 41 inspec. app

Equipment usage                           1,025 machine hrs.             1,575 machine hrs.

How much overhead should be applied to each product? What is the overhead per unit?

The following per unit data is also available

Viking-star; price $39,999, Direct labor $13,021, Direct material $17,385

Lion-star; price $31,999, Direct labor $9,623, Direct Material $13,792

Business   Accounting   
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Answer #1
Particulars basis cost per activity viking lion
Production set up cost no of production set ups. 147600÷4800=30.75 1084*30.75=33333 976*30.75=30012
Raw material ordering cost no of item ordered. 216800÷8000=27.1 2050*27.1=55555 3690*27.1=99999
Product cleaning cost no of inspection 1680200÷775=2167.74 201*2167.74=435715 41*2167.74=88878
Equipment cost no of machine Hours 948500÷12500=75.88 1025*75.88=77777 1575*75.88=119511
Total 602380 338400
No of units 117 86
Per unit overhead cost 5148.547 3934.872
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