Bridgewater Toys Ltd. manufactures skateboards, boogie boards and scooters. Bridgewater has always allocated the indirect manufacturing overhead
Question:
Bridgewater Toys Ltd. manufactures skateboards, boogie boards and scooters. Bridgewater has always allocated the indirect manufacturing overhead based on direct labour hours at a rate of $25 per hour. The plant manager believes this is not accurate and wants to change to a more accurate method of cost allocation. The accounting department provided the following analysis of the relationships between production activities and manufacturing overhead:
Activity Cost driver Allocation rate
Materials handling number of parts $0.25 per part
Assembly machine hours $4.50 per hour
Packaging labour hours $4.00 per hour
A typical batch of 100 skateboards requires 1200 parts, 17 direct labour hours and 8 hours of machine time.
Required
- What would be the total indirect manufacturing costs allocated to each skateboard using their normal overhead allocation method? (5 marks)
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook