Maritime Marine Company has total estimated factory overhead for the year of $986,800, divided into four activities: fabrication, $386,400; assembly, $207,900; setup, $112,000; and inspection, $280,500. Maritime manufactures two types of boats: a speedboat and a bass boat. The activity-base usage quantities for each product by each activity are as follows:

Fabrication Assembly Setup Inspection

Speedboat 1,200 dlh 1,800 dlh 60 setups 600 inspections

Bass boat 1,800 1,200 100 200

3,000 dlh 3,000 dlh 160 setups 800 inspections

Required:

a. Determine the activity rates for each activity.

b. Determine the factory overhead cost per unit for each product, using activity-based costing.

Instructions are below.

Explanation:

Giving the following information:

Estimated costs:

fabrication = $386,400

assembly = $207,900

setup = $112,000

inspection = $280,500.

Fabrication Assembly Setup Inspection

Speedboat: 1,200 dlh 1,800 dlh 60 setups 600 inspections

Bass boat: 1,800 1,200 100 200

3,000 dlh 3,000 dlh 160 setups 800 inspections

First, we need to calculate the overhead rate for each activity:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

fabrication = 386,400/3,000 = $128.8 per direct labor hour

assembly = 207,900/3,000 = $69.3 per direct labor hour

setup = 112,000/160 = $700 per setup

inspection = 280,500/800 = $350.63 per inspection

Now, we can allocate overhead to each product:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Speedboat = 1,200*128.8 + 1,800*69.3 + 60*700 + 600*350.63

Speedboat = $531,678

Bass boat = 1,800 * 128.8 + 1,200*69.3 + 100*700 + 200*350.63

Bass boat = 455,126