Teal Sports offers 2 different types of water sport activities-sailfish rental and banana boat rides.The company has two different activities-lifeguarding and maintenance-that provide input into its cost objectives.Data on estimated overhead for the year follows: $\begin{array}{|c|c|c|c|c|}
\hline \text { Activity } & \text { Driver } & \begin{array}{c}
\text { Estimated } \
\text { Overhead } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Sailfish Rental } \
\text { Estim ate }
\end{array} & \begin{array}{c}
\text { Boat Rides } \
\text { Estimate }
\end{array} \
\hline \text { Lifeguarding } & \text { \# of Labor hours } & \$ 63,940 & 3,280 \text { hours } & 2,280 \text { hours } \
\hline \text { Maintenance } & \text { Hours of riding time } & \$ 88,000 & 1,500 \text { hours } & 2,500 \text { hours } \
\hline
\end{array}$ The company provides 2,400 banana boat rides and 1,200 sailfish rentals each year.How much overhead will be assigned to each banana boat ride?

Question

Quizplus · Accepted Answer

To calculate the overhead assigned to each banana boat ride, we first need to allocate the total overhead costs based on the provided drivers (labor hours for lifeguarding and hours of riding time for maintenance) to each activity. 1. **Lifeguarding Overhead Allocation:**   - Total lifeguarding overhead: $63,940   - Total lifeguarding hours: 3,280 (Sailfish) + 2,280 (Boat Rides) = 5,560 hours   - Overhead rate per lifeguarding hour: $63,940 / 5,560 = $11.50 per hour   - Lifeguarding overhead for Boat Rides: 2,280 hours * $11.50 = $26,2202. **Maintenance Overhead Allocation:**   - Total maintenance overhead: $88,000   - Total maintenance hours: 1,500 (Sailfish) + 2,500 (Boat Rides) = 4,000 hours   - Overhead rate per maintenance hour: $88,000 / 4,000 = $22 per hour   - Maintenance overhead for Boat Rides: 2,500 hours * $22 = $55,0003. **Total Overhead for Banana Boat Rides:**   - Total = Lifeguarding overhead for Boat Rides + Maintenance overhead for Boat Rides   - Total = $26,220 + $55,000 = $81,2204. **Overhead Assigned to Each Banana Boat Ride:**   - Total overhead for Boat Rides: $81,220   - Number of banana boat rides: 2,400   - Overhead per banana boat ride: $81,220 / 2,400 = $33.84Therefore, the overhead assigned to each banana boat ride is $33.84.

Teal Sports Offers 2 Different Types of Water Sport Activities-Sailfish