MedTech. Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $20 per hour and that there were no beginning inventories. The following information was available for 2016, based on an expected production level of 400000 units for the year:

The following production, costs, and activities occurred during the month of August:

Required:
a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for Med Tech. Inc.
b. Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours.

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Activity Cost Driver Budgeted Costs for 2016 S3,600,000 8,800,000 6,000,000 1,200,000 Cost Driver Used Materials handing Milling and grinding Assembly and inspection Testing as Allocation Base Number of parts used Number of machine hours Direct labor hours worked Number of units tested Cost Allocation Rate 1.50 per part 11.00 per hour 5.00 per hour 3.00 per unit Units Produced/Tested 50,000 Direct Materials Costs 53,500,000 Number of Parts Used 275,000 Machine Hours 95,000 Direct Labor Hours 160,000