Multiple Production Department Factory Overhead Rates The total factory overhead for Bardot Marine Company is budgeted for the year at $1,112,500, divided into two departments: Fabrication, $936,250, and Assembly, $176,250. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require four direct labor hours in Fabrication and two direct labor hours in Assembly. The bass boats require three direct labor hours in Fabrication and one direct labor hour in Assembly. Each product is budgeted for 5,000 units of production for the year. If required, round a" per unit answers to the nearest cent. a. Determine the total number of budgeted direct labor hours for the year in each department. Fabrication J direct labor hours Assembly J direct laborhours b. Determine the departmental factory overhead rates for both departments. Fabrication 35- J per dlh ) Assembly $- J per dlh c. Determine the factory overhead allocated per unit for each product using the department facton/ overhead allocation rates. Speedboat: X per unit Bass boat: X per unit Activity-Based Costing: Factory Overhead Costs The total factory overhead for Bardot Marine Company is budgeted for the year at $1,018,500, divided into four activities: fabrication, $420,000; assembly, $174,000; setup, $229,500; and inspection, $195,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The activity-base usage quantities for each product by each activity are as follows: Fabrication Assembly Setup Inspection Speedboat 7,500 dlh 21,750 dlh 54 setups 94 inspections Bass boat 22,500 7,250 396 656 30,000 dlh 29,000 dlh 450 setups 750 inspections Each product is budgeted for 3,000 units of production for the year. a. Determine the activity rates for each activity. Fabrication V per direct labor hour Assembly V per direct labor hour Setup \\1 per setup Inspection J per inspection b. Determine the activity-based factory overhead per unit for each product. Round to the nearest whole dollar. Speedboat $- J per unit Bass boat $- X per unit Single plantwide factory overhead rate Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $113,520. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit: Budgeted Production Direct Labor Hours Per Volume Unit Flutes 2,600 units 0.8 Clarinets 900 1.5 Oboes 1,300 1.0 If required, round all per unit answers to the nearest cent. a. Determine the single plantwide overhead rate. $- \\/ per direct labor hour ) b. Use the overhead rate in (a) to determine the amount of total and perunit overhead allocated to each of the three products. Total Per Unit Factory Overhead Cost Factory Overhead Cost Flutes - v/ V Clarinets V VI 0...... v x Total '1 ActivityBased Product Costing Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: Activity Budgeted Activity cost Production $478,800 Setup 131,100 Inspection 82,000 Shipping 159,100 Customer service 51,600 Total $902,600 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Inspection Number of inspections Shipping Number of customer orders Customer service Number of customer service requests The activitybase usage quantities and units produced for the three products were determined from corporate records and are as follows: Customer Number of Number of , Number of Senate . Setups _ Customer Orders _ Machine Hours Inspections Requests Units white sugar 3,340 80 200 860 40 8,350 Brown sugar 2,130 110 300 2,370 250 5,325 Powdered sugar 2,130 110 500 1,070 110 5,325 Total 7,600 300 1,000 4,300 400 19,000 Each product requires 0.9 machine hour per unit. Required: If required, round all per unit amounts to the nearest cent. 1. Determine the activity rate for each activity. Production HA 63 V per machine hour Setup 437 per setup Inspection 82 per move Shipping 37 per cust. ord. Customer service 129 per customer service request 2. Determine the total and per-unit activity cost for all three products. Total Activity Cost Activity Cost Per Unit White sugar $ 298,760 81.51 X Brown sugar 326,800 138.06 X Powdered sugar 277,040 117.04 X 3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit? The unit costs are different because the products consume many activities in ratios different from the volume V Feedback Check My Work 1. Calculate Activity Rate for each activity: Total Cost : Total Activity-Base = Activity Rate 2. Calculate Activity Cost for each product: Activity-Base Usage x Activity rate from Req. (1) = Activity cost; Sum all activity costs per product to determine a total and divide the total overhead by budgeted units to derive the activity costs per unit for each product.Allocating Selling and Administrative Expenses using ActivityBased Costing Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: Price $760 per unit Cost of goods sold (460) GroSS profit $300 per unit In addition, the company incurs selling and administrative expenses of $237,080. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity Budgeted Activity Cost Activity Base Customer service $53,720 Number of service requests ) Sales order processing 24,960 Number of sales orders Advertising support 158,400 Number of ads placed Total activity cost $237,080 Activity-base usage and unit volume information for the three customers is as follows: The Warehouse Kosmo Co. Supply Universe Total Number of service requests 70 10 260 340 Number of sales orders 220 90 470 780 Number of ads placed 20 10 80 1 10 Unit volume 660 660 660 1,980 Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. Activity Rate Customer Service per serv. req. Sales Order Processing per sls. order DUB Advertising Support per ad 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity C0513 The Warehouse Kosmo Co. Supply Universe U 3. Construct customer protability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. Shrute Inc. Customer Protability Report For the Year Ended December 31 The Warehouse Kosmo co. Supply Universe Revenues $:] $:] Cost of goods sold C] Gross profit $[:] Selling and administrative activities: Customer service 53:] Sales order processing C] Advertising support C] Total selling and administrative activities $[:] Operating income $C] 'UUDDG DUE Mastery Problem: Activity-Based Costing Woo|Corp Woo|Corp buys sheep's wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You've just been hired as a production manager at Woo|Corp. Currently Woo|Corp makes two products: (1) raw, clean wool to be used as stufng or insulation and (2) wool yarn for use in the textile industry. The company would like you to evaluate its costing methods for its raw wool and wool yarn. Single Plantwide Rate Woo|Corp is currently using the single plantwide factory overhead rate method, which uses a predetermined overhead rate based on an estimated allocation base such as direct labor hours or machine hours. The rate is computed as follows: Single Plantwide Factory Overhead Rate = (Total Budgeted Factory Overhead) : (Total Budgeted Plantwide Allocation Base) Woo|Corp has been using combing machine hours as its allocation base. The company would like to consider activitybased costing. In order to understand their current system better, you evaluate Woo|Corp's current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 500 pounds of either raw wool or wool yarn: Budgeted Factory Factory Overhead Type Overhead sorting $25,600 Cleaning 38,400 combing 1,200 Raw Wool Wool Yarn Hours of combing machine use required 80 20 In the following table, use combing machine hours as the allocation base for assigning overhead costs to each product. when required, round your answers to the nearest dollar. Single Plantwide Factory Overhead Rate: $:] per combing hour Raw Wool Wool Yarn Allocated factory overhead cost D D Feedback Activity-Based Costing In order to compare WoolCorp's current method with activitybased costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn. Type of Cost Activity Base Total Cost Sorting Hours of sorting $25,600 Cleaning Units of cleaning machine power 38,400 combing Hours of combing machine use 1,200 Raw Wool Wool Yarn Hours of sorting required 1,000 4,000 Units of cleaning machine power required 1,800 4,200 Hours of combing machine use required 80 20 In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent. Activity Activity Rate Sorting $:] per sorting hour Cleaning $:] per unit of cleaning machine power combing $:] per hour of combing machine use In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product's process. When required, round your answers to the nearest dollar. Dsnu Wnnl mnnl Val-n Raw Wool Wool Yarn Sorting cost $ Cleaning cost Combing cost Total cost