Marigold Skiffs manufactures three models of speedboats—Superior, Deluxe, and Ul

Question

Marigold Skiffs manufactures three models of speedboats—Superior, Deluxe, and Ultra—which are sold through marine retail stores. Budgeted information for the coming year is as follows.

Currently, the company allocates overhead using a single predetermined rate based on machine hours.

Irvin Marigold is considering implementing an activity-based costing system. After studying the company’s operations, he developed the following five activity cost pools.

Irvin also developed the following operating data for the coming year.

To ensure the highest level of production quality, all machines are set up and calibrated at the beginning of every batch.

Superior Deluxe Ultra Total Sales revenue $54,035,000 $86,349,600 $101,866,800 $242,251,400 Direct material 17,513,400 27,243,540 40,127,640 84,884,580 Direct labor 10,610,050 13,024,800 16,482,000 40,116,850 Overhead 71,045,910 Gross profit $46,204,060 Calculate the unit cost of each of the three speedboat models using the proposed activity-based costing system of allocating overhead. (Round answers to 0 decimal places, e.g. 5,275.) Superior Deluxe Ultra Cost per unit Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Pre-determined OH rate: Estimated Overheads / Machine hours $ 71045910/600 = $ 121.78 per MH Number of machine hours: Superior (100*1010) 101000 Deluxe (200*1206) 241200 Ultra (300*804) 241200 Total MH 583400 COST PER UNIT UNDER SIMPLE COSTING: SUPERIOR DELUXE ULTRA AMOUNT CPU AMOUNT CPU AMOUNT CPU Direct material 17513400 17340 27243540 22590 40127640 49910 Direct Labour 10610050 10505 13024800 10800 16482000 20500 OH Supperior (101000*121.78) 12299780 12178 Deluxe and Ultra (241200*121.78) 29373336 24356 29373336 36534 Total cost and cost per unit 40423230 40023 69641676 57746 85982976 106994 Superior Deluxe Ultra Cost per unit 40023 57746 106994 Activity rate: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Machining MH 14585000 583400 25 machine setup Setups 23,932,740 1,006 23790 Quality inspection Inspection 14,016,670 20,110 697 material receiving Deliveries 6,960,000 2,000 3480 Material rrequisition Requisitions 11,551,500 13590 850 Number of batches and inspections Superior Deluxe Ultra Total Number of units 1010 1206 804 Divide number of units per batch 5 3 2 Batches 202 402 402 1006 Quality inspection per batch 10 15 30 Inspections 2020 6030 12060 20110 Overhead assigned: Activity Rate Superior Deluxe Ultra Total Machining 25 2525000 6030000 6030000 14585000 machine setup 23790 4805580 9563580 9563580 23932740 Quality inspection 697 1407940 4202910 8405820 14016670 material receiving 3480 2088000 2088000 2784000 6960000 Material rrequisition 850 2745500 3621000 5185000 11551500 Total cost 13572020 25505490 31968400 71045910 Divide: Number of units 1010 1206 804 OH cost 13437.64 21148.831 39761.69 COST PER UNIT UNDER ABC Superior Deluxe Ultra material 17340 22590 49910 labour 10505 10800 20500 OH 13437.64 21148.83 39761.69 Cost per unit 41282.64 54538.83 110171.7

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