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 HandlingStandard 20,000 dlh 60,000 dlh 120 setups 200 movesDeluxe 60,000 20,000 880 1,40080,000 dlh 80,000 dlh 1,000 setups 1,600 movesEach 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.

Answer 1

Answer:

Explanation:

The computations are shown below:

(A) Activity rates:

Fabrication = $1,200,000 ÷ 80,000 = $15 per dlh

Assembly  = $48000,000 ÷ 80,000 = $6 per dlh

Setup =  = $400,000 ÷ 1,000 = $400 per setup

Materials Handling  = $320,000 ÷ 1,600 = $200 per move

(B) Factory overhead cost per unit:

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

Deluxe:

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