Fraser Products, Inc., which produces copy machines for wholesale distributors in the Pacific Northwest, has just completed packaging an order from Kent Company for 150 Model 14 machines. Fraser recently switched from a traditional system of allocating costs to an activity-based costing system. Before the Kent order is shipped, the controller wants a unit cost analysis comparing the amounts computed under the traditional costing system with those computed under the ABC system. Direct materials, purchased parts, and direct labor costs for the Kent order are as follows:

Cost of direct materials ...........$17,450.00

Cost of purchased parts ...........$14,800.00

Direct labor hours .................140

Average direct labor pay rate ........... $16.50

Other operating costs are as follows:

Traditional costing data:

Overhead costs were applied at a single, plantwide overhead rate of 240 percent of direct labor dollars.

Activity-based costing data:

Required
1. Using the traditional costing approach, compute the total cost of the Kent order.
2. Using the activity-based costing approach, compute the total cost of the Kent order.
3. Manager Insight: What difference in the amount of cost assigned to the Kent order resulted from the shift to activity-based costing? Does the use of activity-based costing guarantee cost reduction for everyproduct?

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Activity Usage for Activity Cost Driver Activity Cost Rate Kent Order Engineering systems design Setup Parts production Assembly Packaging Building occupancy Engineering hours Number of setups Machine hours Assembly hours Packaging hours Machine hours $28.00 per engineering hour $42.00 per setup $37.50 per machine hour $44.00 per assembly hour $28.50 per packaging hour $10.40 per machine hour 18 engineering hours 8 setups 84 machine hours 36 assembly hours 28 packaging hours 84 machine hours