=+6-51 KKK Activity-based job costing, unit-cost comparisons OBJECTIVES 7, 8 Dynamic Ltd has a machining facility specialising in jobs for the aircraft-components market. Dynamic Ltd’s previous simple job-costing system had two direct cost categories (direct materials and direct manufacturing labour) and a single indirect cost pool (manufacturing overhead, allocated using direct manufacturing labour-hours). The indirect cost-allocation rate of the simple system for 2013 would have been $115 per direct manufacturing labour-hour.

Recently, a team with members from product design, manufacturing and accounting used an ABC approach to refine its jobcosting system. The two direct cost categories were retained. The team decided to replace the single indirect cost pool with five indirect cost pools. The cost pools represent five activity areas at the plant, each with its own supervisor and budget responsibility.

Pertinent data are as follows:

Activity area Cost-allocation base Cost-allocation rate Materials handling Parts $0.40 Lathe work Lathe turns 0.20 Milling Machine-hours 20.00 Grinding Parts 0.80 Testing Units tested 15.00 Information-gathering technology has advanced to the point at which the data necessary for budgeting in these five activity areas are collected automatically.

Two representative jobs processed under the ABC system at the plant in the most recent period had the following characteristics:

Job 410 Job 411 Direct materials cost per job $9 700 $59 900 Direct manufacturing labour cost per job $750 $11 250 Number of direct manufacturing labour-hours per job 25 375 Parts per job 500 2 000 Lathe turns per job 20 000 59 250 Machine-hours per job 150 1 050 Units per job (all units are tested) 10 200 Required 1 Calculate the manufacturing cost per unit for each job under the previous simple job-costing system.