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 follows:
| Units produced | 40,000 | 15,000 |
| Direct material | $10 per unit | $25 per unit |
| Direct labor | $8 per unit | $10 per unit |
| Direct labor hours | 6,000 | 8,000 |
| Machine setups | 750 | 250 |
| Machine hours | 20,000 | 11,000 |
Required:
| a. | Using the traditional method, determine the overhead rate per direct labor hour. |
| b. | Using the activity-based costing approach, determine the two activity rates. |
| c. | Using the activity-based costing approach, determine the unit product cost for the |
Beginner board.
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