Question - Bayline, Inc. manufactures two types of surf boards, Beginner and Longboard. Manufacturing overhead has been applied on the basis of direct labor hours. Bayline gathers some activity information and is interested in implementing an activity-based costing system. The company wants all overhead costs to be allocated to products. The overhead cost pools and activity drivers are as follows:
|
Activity Pool
|
Overhead Costs
|
Total Driver Usage
|
|
Machine setup
|
$36,000
|
1,000 setups
|
|
Cutting/Assembly
|
62,000
|
31,000 machine hours
|
|
Total overhead costs
|
$98,000
|
|
Other product information is as follows:
|
|
Beginner
|
Longboard
|
|
Units produced
|
40,000
|
15,000
|
|
Direct material cost per unit
|
$10
|
$25
|
|
Direct labor cost per unit
|
$8
|
$10
|
|
Direct labor hours
|
6,000
|
8,000
|
|
Machine setups
|
750
|
250
|
|
Machine hours
|
20,000
|
11,000
|
Required:
Compute the total unit costs for each product using direct labor hours as the allocation base.
Compute the total unit costs for each product using machine hours as the allocation base.
Compute the total unit costs for each product using activity-based costing.