=+6-22 KK Activity-based costing, manufacturing OBJECTIVES 3, 5, 7 Smart Doors Ltd produces two types of doors, interior and exterior. The company’s simple costing system has two direct cost categories

(materials and labour) and one indirect cost pool. The simple costing system allocates indirect costs on the basis of machine-hours.

Recently, the owners of Smart Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Smart Doors’ production for the most recent year follows:

Interior Exterior Units sold 3200 1800 Selling price $125 $200 Direct materials cost per unit $30 $45 Direct manufacturing labour cost per hour $16 $16 Direct manufacturing labour-hours per unit 1.50 2.25 Production runs 40 85 Materials moves 72 168 Machine set-ups 45 155 Machine-hours 5500 4500 Number of inspections 250 150 The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious