Question

Vintage Fun reproduces old−fashioned style roller skates and skateboards. The annual production and sales of roller skates is 900 ​units, while 1,790 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 2.5 direct labor hours per​ unit, while skateboards require 2.25 direct labor hours per unit. The total estimated overhead for the period is $115,200.

The company is looking at the possibility of changing to an activity−based costing system for its products. If the company used an activity−based costing​ system, it would have the following three activity cost​ pools:

		Expected activity
Activity cost pool	Estimated overhead cost	Roller skates	Skateboards	Total
Setup costs	$6,850	335	310	645
Engineering costs	$16,700	430	690	1,120
Maintenance costs	$91,650	2,375	2,148	4,523

The overhead cost per skateboard using an activity−based costing system would be closest to​ (Round all answers to two decimal​ places.)

Answer 1

• Overhead cost per skateboard using ABC system would be closest to
  $ 31.90 per unit [Answer]
• Working

	Activity rate	Overhead cost allocated to Skateboard
Setup Cost	$10.62	$3,292
Engineering Cost	$14.91	$10,288
Maintenance Cost	$20.26	$43,520
Total Overhead cost		$57,101
Units of Skateboard		1,790
Overhead cost per skateboard [$57101 / 1790]		$31.90 [Answer]

	Activity rate	Overhead cost allocated to Skateboard
Setup Cost	=6850/645	=310*10.62
Engineering Cost	=16700/1120	=690*14.91
Maintenance Cost	=91640/4523	=2148*20.26