The Canine Company has total estimated factory overhead for the year of $2,400,0

Question

The Canine Company has total estimated factory overhead for the year of $2,400,000, divided into four activities: Fabrication, $1,200,000; Assembly, $480,000; Setup, $400,000; and Materials Handling $320,000. Canine manufactures two products: Standard Crates and Deluxe Crates. The activity-base usage quantities for each product by each activity are as follows:

Fabrication Assembly Setup Materials Handling
Standard 20,000 dlh 60,000 dlh 120 setups 200 moves
Deluxe 60,000 20,000 880 1,400
80,000 dlh 80,000 dlh 1,000 setups 1,600 moves


Each product is budgeted for 20,000 units of production for the year. Determine (a) the activity rates for each activity and (b) the factory overhead cost per unit for each product using activity-based costing.

Explanation / Answer

(a) the activity rates for each activity and Fabrication: 1,200,000/80,000= $15 per dlh Assembly: 480,000/80,000 = $6 per dlh Setup: 400,000/1,000 = $400 per setup Materials handling: 320,000/1,600 = $200 per move (b) the factory overhead cost per unit for each product using activity-based costing. Standard: Overhead total costs: 20,000*15 + 60,000*6 + 120*400 + 200*200 = $748,000 overhead cost per unit = $748,000/20,000 = $37.40 Delux: Overhead total costs: 60,000*15 + 20,000*6 + 880*400 + 1400*200 = $1,652,000 Overhead cost per unit = $1,652,000/20,000 = $82.60

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.