The Turtle Company Has Total Estimated Factory Overhead for the Year

question 130

Essay

The Turtle Company has total estimated factory overhead for the year of $1,200,000, divided into four activities: fabrication, $600,000; assembly, $240,000; setup, $200,000; and materials handling, $160,000. Turtle manufactures two products, Boogie Boards and Surf Boards. The activity-base usage quantities for each product by each activity are as follows: $\begin{array}{|l|l|l|l|l|}\hline & \text { Fabrication } & \text { Assembly } & \text { Setup } & \begin{array}{l}\text { Materials } \\\text { Handling }\end{array} \\\hline \text { Boogie Boards } & 10,000 \mathrm{dlh} & 30,000 \mathrm{dlh} & 60 \text { setups } & 100 \text { moves } \\\hline \text { Surf Boards } & \underline{30,000} & \underline{10,000} & \underline{440} & \underline{700} \\\hline & \underline{40,000} \mathrm{dlh} & \underline{40,000} \mathrm{dlh} & \underline{500} \text { setups } & \underline{800} \text { moves } \\\hline\end{array}$ Each product is budgeted for 10,000 units of production for the year. Determine a) the activity rates for each activity and b) the factory overhead cost per unit for each product using activity-based costing.

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Definitions:

Exchange Rates

The value of one currency for the purpose of conversion to another, determining how much one currency is worth in terms of the other.

Forward Exchange Contract

An agreement to exchange currencies at a specified rate on a predetermined future date, used to hedge against currency risk.

Net Income

The net income of a company, calculated by deducting all costs and taxes from the overall revenue.

Local Currency Units

Local currency units refer to the currency that is legal tender in a country's domestic economy and used to present financial information.