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Problem - Bayline, Inc. manufactures two types of surf boards, Beginner and Longboard. Manufacturing overhead has been applied on the basis of direct labor hours. Bayline gathers some activity information and is interested in implementing an activity-based costing system. The company wants all overhead costs to be allocated to products. The overhead cost pools and activity drivers are as follows:
Activity Pool
Overhead Costs
Total Driver Usage
Machine setup
$36,000
1,000 setups
Cutting/Assembly
62,000
31,000 machine hours
Total overhead costs
$98,000
Other product information is as follows:
Beginner
Longboard
Units produced
40,000
15,000
Direct materials cost per unit
$10
$25
Direct labor cost per unit
$8
Direct labor hours
6,000
8,000
Machine setups
750
250
Machine hours
20,000
11,000
Required - Compute the total unit costs for each product using direct labor hours as the allocation base.
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