Question

The total factory overhead for magnum corporation is budgeted for the year at $500,000. this is divided into three activity pools: fabrication, $246,000; assembly, $144,000, and setup, $110,000. magnum manufactures two types of kayaks: basic and deluxe. the activity-based usage quantities for each project by activity is as follows: fabrication assembly setup basic 2,000 dlh 8,000 dlh 5 setups deluxe 10,000 dlh 24,000 dlh 15 setups total activity-base usage 12,000 dlh 32,000 dlh 20 setups each product is budgeted for 2,500 units of production for the year. what is the activity-based factory overhead per unit for the deluxe kayak?
a. $158.20
b. $41.80
c. $154.54
d. $100.00

Answer 1

Cost drivers for the activities are as below:

Basic Delux Total

Fabrication 2000 10000 12000

Assembly 8000 24000 32000

Set up 5 15 20

Total Cost of below activities are as follows:

Fabricators $246000

Assembly $144000

Set Up $110000

Cost per Activity= Total Cost per Activity/Total Cost Driver per activity

Fabrication= 246000/12000=$20.5 per dlh

Assembly=144000/32000=$4.5 per dlh

Set-up=110000/20=$5500set up

Drivers used for production of Deluxe kayak along with cost:

Fabricators=10000 dlh*$20.5 per dlh= $205000

Assembly= 24000dlh*$4.5 per dlh= $108000

Set Up=15 set ups*$5500 per set up= $82500

Total Cost= $395500

Cost per unit= $395500/2500 units

Cost per Unit= $158.20 per unit.