Dream Sewing Machine Company uses activity-based costing to account for its manufacturing process. Following are the four activities identified with the process and their budgeted costs for the month of December:

Total Budgeted

Activity Cost Allocation Base

Materials handling $55,000 Number of parts

Machine setup 16,500 Number of setups

Assembling 23,000 Number of parts

Packaging 8,500 Number of finished units

Dream expects to produce 1,000 sewing machines in the month of December. The sewing Machines are expected to use 25,000 parts and require 15 setups.

a) Compute the cost allocation rate for each activity.

b) Compute the average manufacturing cost of each sewing machine assuming direct

materials are $175 per machine.