Lakeside Inc. manufactures four lines of remote control boats and uses activity-based costing to calculate product cost. Activity Cost PoolsEstimated Total CostEstimated Cost DriverMachining$321,00013,400machine hoursSetup 72,000300batchesQuality control 100,000730inspections  Suppose the Luxury boat requires 5,450 machine hours, 295 inspections, and 69 batches. Using activity proportions, determine the amount of overhead assigned to the Luxury product line. How would i work this problem i keep getting machine hours wrong?

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Asked Sep 23, 2019
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Lakeside Inc. manufactures four lines of remote control boats and uses activity-based costing to calculate product cost.

 

Activity Cost Pools Estimated Total Cost Estimated Cost Driver
Machining $ 321,000 13,400 machine hours
Setup   72,000 300 batches
Quality control   100,000 730 inspections
 

 

Suppose the Luxury boat requires 5,450 machine hours, 295 inspections, and 69 batches. Using activity proportions, determine the amount of overhead assigned to the Luxury product line.

 

How would i work this problem i keep getting machine hours wrong?

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Expert Answer

Step 1

Step 1: 

Calculate the activity rate for each cost pools.

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Activity Rate Activity based allocation rate Estimated Estimated Activity cost рool (A) Cost driver total cost cost driver (В) (D) 13,400 (C) $321,000 (C/D) Machining Setup Quality control Machine hours Batches Inspection $24 S72,000 300 $240 S100,000 730 $137

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Step 2

Step 2 :

Calculate the overhead ra...

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Overhead rate Expected use Activity based |of Cost driver allocation rate Allocation Cost pool overhead (A) (B) (AxB) Machining Setup Quality control $24 5,450 $130,800 s16,560 $40,415 69 $240 295 $137

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Activity Based Costing

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