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Activity Based Costing – Essay Sample

Activity Based Costing – Essay Sample

Calculation of the manufacturing overhead rate based on labor hours and machine hours (two separate computations).

Manufacturing overhead rate based on labor hours

Total number of labor hours = 5+25 = 30

Number of hours on Millennium Surf Kit = 5

Manufacturing overhead rate to allocating manufacturing costs to Millennium Surf Kits = 5/30 = 1/6

Number of hours on Professional board = 25

Manufacturing overhead rate to allocating manufacturing costs to professional board = 25/30 = 5/6

Manufacturing overhead rate based on machine hours

Total number of machine hours = 7,500+4,000 = 11,500

Number of hours on Millennium Surf Kit = 7,500

Manufacturing overhead rate to allocating manufacturing costs to Millennium Surf Kits = 7,500/11,500

Number of hours on Professional board = 4,000

Manufacturing overhead rate to allocating manufacturing costs to professional board = 4,000/11,500

 

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