Activity-Based Costing Mainline Marine Company has total estimated factory overhead for the year of $920,100, divided into four activities: fabrication, $455,700; assembly, $170,400; setup, $138,000; and inspection, $156,000. Mainline manufactures two types of boats: a speedboat and a bass boat. The activity-base usage quantities for each product by each activity are as follows: Fabrication Assembly Setup Inspection Speedboat 800 dlh 1,700 dlh 40 setups 90 inspections Bass boat 2,300 700 110 300 3,100 dlh 2,400 dlh 150 setups 390 inspections Each product is budgeted for 100 units of production for the year. a. Determine the activity rates for each activity. Fabrication per dhl Assembly per dhl Setup per setup Inspection per inspection b. Determine the factory overhead cost per unit for each product, using activity-based costing. If required, round to the nearest cent. Speedboat Bass boat
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity-Based Costing
Mainline Marine Company has total estimated factory overhead for the year of $920,100, divided into four activities: fabrication, $455,700; assembly, $170,400; setup, $138,000; and inspection, $156,000. Mainline manufactures two types of boats: a speedboat and a bass boat. The activity-base usage quantities for each product by each activity are as follows:
| Fabrication | Assembly | Setup | Inspection | |||||
| Speedboat | 800 | dlh | 1,700 | dlh | 40 | setups | 90 | inspections |
| Bass boat | 2,300 | 700 | 110 | 300 | ||||
| 3,100 | dlh | 2,400 | dlh | 150 | setups | 390 | inspections |
Each product is budgeted for 100 units of production for the year.
a. Determine the activity rates for each activity.
| Fabrication | per dhl |
| Assembly | per dhl |
| Setup | per setup |
| Inspection | per inspection |
b. Determine the
| Speedboat | |
| Bass boat |
Under the ABC system, the cost is allocated to the products based on their usage of activity.
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