Kowalski Company manufactures a number of specialized machine parts. Part Compo-24 uses $35 of direct materials and $15 of direct labor per unit. Kowalski€™s estimated manufacturing overhead is as follows.
Materials handling ........ $150,000
Machining ........... 180,000
Factory supervision ........ 138,000
Total ............. $468,000
Overhead is applied based on direct labor costs, which were estimated at $200,000. Kowalski is considering adopting activity-based costing. The cost drivers are estimated at:

Instructions
(a) Compute the cost of 1,000 units of Compo-24 using the current traditional costing system.
(b) Compute the cost of 1,000 units of Compo-24 using the proposed activity-based costing system. Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000 direct laborhours.

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Activity Expected Use 50,000 po Cost Driver Materials handling Machining Weight of materials Machine hours 20,000 hours Factory supervision Dect labor hours12,000 hours