Cost distortions Ferreira Company has established the following cost pools for 2000:

REQUIRED

(a) Determine the unit cost of each job using machine hours to allocate all sup¬ port costs.

(b) Determine the unit cost of each job using activity-based costing.

(c) Which of the two methods produces more accurate estimates of job costs? Explain.

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COST POOLS COMMITTED COSTS COST DRIVERS LEVEL Maintenance $ 20,000 Machine hours 10,000 Materials handling 25,000 Number of moves 250 Machine setup 30,000 Setup hours 1,000 Inspection 25,000 Number of inspections 500 $100,000 Total The following information pertains to two representative jobs completed during January 2000: ITEM J101 J102 Direct materials cost $10,000 $7,500 Direct labor cost $ 8,000 $5,500 Number of units 2,000 1,500 Direct labor hours 640 400 Machine hours 700 650 Number of material moves 40 15 Number of setup hours 80 40 Number of inspections 35 15