activity based costing

Part I. Activity-based Costing Direction: Read and analyze the case and comply with the requirement of the case. Present your solution in good form. Problem 1. The controller for Seashell Inc., a company which uses an automated process to make sailboats, established the following overhead cost pools and cost drivers: Overhead Cost Pool Machine setups Quality control Other overhead cost Total Overhead Costs Budgeted Overhead Bhd 250,000 420,000 100,000 Bhd 770,000 Cost Driver # of setups # of inspections # of machine hrs Estimated Cost Rate 500 168 There was a recent order of 2,000 sailboats and the following were used: Machine setups 50 setups Quality inspections 300 inspections Machine hours 2,000 machine hours Under volume-based costing, the pre-determine overhead rate based on machine hour is Bhd38.50 Required: 1. Determine the unit overhead cost under the activity-based costing system. (5 marks) Marking Scheme: Analysis of data - 3 marks; correct computation - 2 marks 2. Make a comparative analysis of the two cost systems and why these differences important to the company? Marking scheme: Two cost systems analysis - 3; Importance - 2