Question

Activity-Based Costing: Factory Overhead Costs

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,296,900, divided into four activities: fabrication, $680,000; assembly, $248,000; setup, $198,900; and inspection, $170,000. 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	8,500	dlh	23,250	dlh	61	setups	106	inspections
Bass boat	25,500		7,750		449		744
	34,000	dlh	31,000	dlh	510	setups	850	inspections

Each product is budgeted for 3,000 units of production for the year.

a. Determine the activity rates for each activity.

Fabrication
Assembly
Setup
Inspection

b. Determine the activity-based factory overhead per unit for each product. Round to the nearest whole dollar.

Speedboat
Bass boat

Answer 1

(a) Activity Rates
Fabrication ( $ 680,000 / 34,000 )	$ 20 per direct labor hour
Assembly ( $ 248,000 / 31,000)	$ 8   per direct labor hour
Setup ( $ 198,900 / 510 )	$ 390 per setup
Inspection ( $ 170,000 / 850)	$ 200 per inspection

(b)
	Activity Rate (A)	Activity Base Speed Boat (B)	Activity Base Bass Boat (C )	Overhead Cost Speed Boat (A x B )	Overhead Cost Bass Boat (A x C )
Fabrication	20	8,500	25,500	170000	510000
Assembly	8	23,250	7,750	186000	62000
Setup	390	61	449	23790	175110
Inspection	200	106	744	21200	148800
Total Overhead Cost				400990	895910
/ Total Units				3,000 Units	3,000 Units
Overhead Per Unit				$ 134	$ 299