Activity-based job costing, unit cost comparisons. The Tracy Corporation has a machining facility specializing in jobs for the aircraft components market. The prior 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 labour-hours). The indirectcost allocation rate ofthe prior system for 2007 would have been $138 per direct manufacturing labour-hour.

Recently, a team with members from product design, manufacturing, and accounting used an activity-based approach to refine its job-costing system. The two direct-cost cate¬

gories were retained. The team decided to replace the single indirect-cost pool with five indirect-cost pools. These five cost pools represent five activity areas at the facility, each with its own supervisor and budget responsibility. Pertinent data are as follows:

Cost Driver Used Cost Allocation Activity Area as Allocation Base Rate Materials handling Parts $ 0.48 Lathe work Turns 0.24 Milling Machine-hours 24.00 Grinding Parts 0.96 Testing Units tested 18.00 Information-gathering technology has advanced to the point where all the data necessary for budgeting in these five activity areas are automatically collected.

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

Job 410 Job 411 Direct materials cost per job $11,640 $71,880 Direct manufacturing labour cost per job $ 900 $13,500 Direct manufacturing labour-hours per job 25 375 Parts per job 500 2,000 Turns per job 20,000 60,000 Machine-hours per job 150 1,050 Units per job (all units are tested) 10 200 Required 1. Compute the per unit manufacturing costs of each job under the prior job-costing system.

2. Compute the per unit manufacturing costs of each job under the activity-based job-costing system.

3. Compare the per-unit cost figures forJobs 410 and 411 computed in requirements 1 and 2.

Why do the prior and the activity-based costing systems differ in their job-cost estimates for each job? Why might these differences be important to the Tracy Corporation?