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33. Sea Worthy makes 2 different types of custom boats, commercial fishing and s

ID: 2456556 • Letter: 3

Question

33. Sea Worthy makes 2 different types of custom boats, commercial fishing and sail boats both for recreation and competition. The company consists of two different departments, design, and production. The company has decided to allocate overhead costs in each of the two cost pools. The direct labor cost per hour is $18. Data on estimated overhead follows:

Activity

Driver

Estimated Overhead Cost

Sailboats Estimate

Fishing Boats Estimate

Product design

# of designs

$130,000

45 designs

55 designs

Quality control

# of inspections

$119,560

560 inspections

420 inspections

        If the company designs and produces and sells 48 sailboats, each sailboat requires 1,800 labor hours and 12 inspections, how much overhead will be assigned to each sailboat produced?

Activity

Driver

Estimated Overhead Cost

Sailboats Estimate

Fishing Boats Estimate

Product design

# of designs

$130,000

45 designs

55 designs

Quality control

# of inspections

$119,560

560 inspections

420 inspections

Explanation / Answer

Activity

Estimated Overhaed

Sailboats Estimate

Fishingboat Estimate

Rate per boat

Product Design

    1,30,000.00

                 45.00

                55.00

             1,300.00

Quality Control

    1,19,560.00

              560.00

             420.00

                122.00

Overhead to be assigned to each sailboat

Sailboats Estimate

Nos. of boat to be designed & produced

                 48.00

Rate per design

           1,300.00

Total design cost (a)

        62,400.00

Nos. of inspection to be done

              576.00

Rate per inspection

              122.00

Total inspection cost

        70,272.00

Total Overhead (a+b)

     1,32,672.00

Note: It is assumed that overhead are vairable

Activity

Estimated Overhaed

Sailboats Estimate

Fishingboat Estimate

Rate per boat

Product Design

    1,30,000.00

                 45.00

                55.00

             1,300.00

Quality Control

    1,19,560.00

              560.00

             420.00

                122.00

Overhead to be assigned to each sailboat

Sailboats Estimate

Nos. of boat to be designed & produced

                 48.00

Rate per design

           1,300.00

Total design cost (a)

        62,400.00

Nos. of inspection to be done

              576.00

Rate per inspection

              122.00

Total inspection cost

        70,272.00

Total Overhead (a+b)

     1,32,672.00

Note: It is assumed that overhead are vairable

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