The Turtle Company has total estimated factory overhead for the year of $1,200,0
ID: 2535114 • Letter: T
Question
The Turtle Company has total estimated factory overhead for the year of $1,200,000, divided into four activities: fabrication, $600,000; assembly, $240,000; setup, $200,000; and materials handling, $160,000. Turtle manufactures two products, Boogie Boards and Surf Boards. The activity-base usage quantities for each product by each activity are as follows:
Each product is budgeted for 10,000 units of production for the year. Determine the following:
a. The activity rates for each activity.
b. The factory overhead cost per unit for each product using activity-based costing. Round your answers to two decimal places.
Fabrication Assembly Setup MaterialsHandling Boogie Boards 10,000 dlh 30,000 dlh 60 setups 100 moves Surf Boards 30,000 10,000 440 700 40,000 dlh 40,000 dlh 500 setups 800 moves
Explanation / Answer
Solution:
Part a --- Activity rates for each activity
Total Estimated Overhead Cost
Total Estimated Activity
Activity Rate
A
B
A/B
Fabrication
$600,000
40,000
Direct Labor Hour
$15.00
per DLH
Assembly
$240,000
40,000
Direct Labor Hour
$6.00
per DLH
Setup
$200,000
500
Setups
$400.00
Per setup
Materials Handling
$160,000
800
moves
$200.00
per move
$1,200,000
Part b –
Boogie Board
Surf Board
Activity Rate
Usage Quantities
Allocated Overhead
Usage Quantities
Allocated Overhead
A
B
A*B
C
A*C
Fabrication
$15.00
10000
$150,000
30000
$450,000
Assembly
$6.00
30000
$180,000
10000
$60,000
Setup
$400.00
60
$24,000
440
$176,000
Materials Handling
$200.00
100
$20,000
700
$140,000
Total Overhead
$374,000
$826,000
Production Units
10,000 Units
10,000 Units
Factory Overhead per unit (total Overhead / Total Production Units)
$37.40
($374,000 / 10,000)
$82.60
($826,000 / 10,000)
Factory overhead per unit for Boogie Board
$37.40
Factory overhead per unit for Surf Board
$82.60
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Total Estimated Overhead Cost
Total Estimated Activity
Activity Rate
A
B
A/B
Fabrication
$600,000
40,000
Direct Labor Hour
$15.00
per DLH
Assembly
$240,000
40,000
Direct Labor Hour
$6.00
per DLH
Setup
$200,000
500
Setups
$400.00
Per setup
Materials Handling
$160,000
800
moves
$200.00
per move
$1,200,000
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