Surfs Up manufactures surfboards. The company produces two models: the Small Board and the Big Board. Data regarding the two boards are as follows:

The Big Board requires $75 in direct materials per unit, whereas the Small Board requires $40. The company pays an average direct labor rate of $13 per hour. The company has historically used direct labor hours as the activity base for applying overhead to the boards. Manufacturing overhead is estimated to be $1,664,000 per year. The Big Board is more complex to manufacture than the Small Board because it requires more machine time.

Blake Moore, the company's controller, is considering the use ofactivity-based costingto apply overhead because the surfboards require such different amounts of machining. Blake has identified the following four separate activity centers:

Required:

A. Calculate the overhead rate on the basis of traditional overhead allocation with direct labor hours as the base. Round to the nearest penny. $per direct labor hour

B. Determine the total cost required to produce one unit of each product. (Use the overhead rate calculated in question A.) Round to the nearest penny.

	Total Cost per Unit
Big Board	$
Small Board	$

C. Calculate the overhead rate for each activity center on the basis of activity-based costing techniques.

Machine setup	$per setup
Special design	$per design hour
Production	$per direct labor hour
Machining	$per machine hour

D. Determine the total cost required to produce one unit of each product. Use the overhead rates calculated in question C. Round to the nearest penny.

	Total Cost per Unit
Big Board	$
Small Board	$

E. Activity-based costing, ABC, shifts overhead costs proportionately amongSelectActivitiesBatchesProductsItem 10