Hello,

I have been working through this problem in preparation for the end of semester exam, and would like some help to check that I am on the right track.

Attached is a copy of the problem. Any solutions that I can use to compare with my answers would be a big help : )

Many thanks

10 ABC: Comparison to traditional costing LO2, 3, 4 Surfs Up manufactures surfboards. The company produces two models: the small board and the big board. Data regarding the two boards are as follows: Product DL per Unit Big Annual Production 1.5 Small 1 Total DL hours 10 000 boards 15000 35 000 boards 35000 The big board requires $75 in direct materials per unit, whereas the small board requires $40. The company pays an average direct labour rate of $13 per hour. The company has historically used direct labour hours as the activity base for applying overhead to the boards. Manufacturing overhead is estimated to be $1 664 000 per year. Volume of annual activity Activity Centre Cost drivers Machine setup Number of setups Traceable cots Big board Small board $100,000.00 100 100 Special design Design hours $364,000 900 100 Production DL hours $900,000 15000 35000 Machining Machine hours $300.000 9000 1000 a Calculate the overhead rate based on traditional overhead allocation with direct labour hours as the base. b Determine the total cost to produce one unit of each product. (Use the overhead rate calculated in question A.) c Calculate the overhead rate for each activity centre based on activity-based costing techniques. d Determine the total cost to produce one unit of each product. Use the overhead rates calculated in question C