ABC and capacity usage. Zaynab Bibi Company has identified the following activities and cost drivers for its manufacturing overhead. Zaynab calculates activity cost rates based on cost driver capacity.

Activity Activity Costs Cost Driver Capacity Machine setup $600,000 5,000 setup-hours Material handling 240,000 100,000 kilograms of material Zaynab makes only two products: Daska and Kothi. During 2007, Daska required 3,000 machine setup-hours and handling of 40,000 kilograms of materials. Kothi’s production required 1,500 setup-hours and handling of 50,000 kilograms ofmaterials.

1. Calculate the total amount of costs allocated to both products from each activity.

2. Compute the cost of unused capacity for each activity.