ShipShape Company makes 2 different types of boats, commercial fishing and sail

Question

ShipShape Company makes 2 different types of boats, commercial fishing and sail boats both for recreation and competition. The company consists of two different departments, design & engineering, and production. The company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead follows:
Activity Driver Estimated Overhead Cost Sailboat Estimate Fishing Estimate
Product Design # of designs $180,000 22 designs 18 designs
Production Labor hours $945,000 4,000 hours 3,500 hours

If the company produces and sells 22 sailboats, and each sailboat requires 180 labor hours, how much overhead will be assigned to each sailboat produced?
Answer


$27,180

$22,680

$36,900

$32,400

Explanation / Answer

Estimated Overhead Cost Sailboat Estimate Fishing Estimate Production Labor hours $945,000 4,000 hours 3,500 hours Rate per hour $126 Number of Hours used by sailboat 180 Overhead to be assigned = 126 x 180 = $22,680 Answer $22,680

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