1.Calculate the total unit cost for the art design.

2.Suppose that Riverdale Printing allocates overhead by a traditional production volume-based method using direct labor dollars as the allocation base and one cost pool. Determine the over- head rate per direct labor dollar and the per unit overhead assigned to the Art of Design. Discuss the difference in cost allocations between the traditional method and the activity-based costing approach.

Co F .191% 1 12:13 PM ABC problem.docx 27 : The Riverdale Printing Company prints limited edition art books with production runs of 15,000 to 100,000. It has recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to one product, Art of Design, and the ABC cost pools: Art of Design: Annual production 40,000 units Direct materials per unit $37 O Direct labor per unit $8 Manufacturing overhead cost pools: Cost Pool Cost Cost Driver Materials ordering $ 840,000 Number of purchase orders Materials inspection 525,000 Number of receiving reports Equipment setup 2,500,000 Number of setups Quality control 1,000,000 Number of inspections Other 25,000,000 Direct labor cost Total manufacturing overhead $29,865,000 Annual activity information related to cost drivers: Cost Pool All Books Art of Design Materials ordering 120,000 orders 1,200 Materials inspection 2,100 receiving reports 315 Equipment setup 125 setups Quality control 5,000 inspections 500 Other $12,500,000 direct labor $320,000