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Activity - based costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity
Activitybased costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activitybased costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers activities Assume that the direct labor rate is $ per hour and that there were no beginning inventories. The following information was available for based on an expected production level of units for the year: Activity Budgeted Cost Driver Used Cost Cost Driver Costs for as Allocation Base Allocation Rate Materials handling $ Number of parts used $ per part Number of machine hours per hour Milling and grinding Assembly and inspection Testing Direct labor hours worked per hour Number of units tested per unit The following production, costs, and activities occurred during the month of August: Units ProducedTested Direct Materials Costs Number of Parts Used Machine Hours Direct Labor Hours Required: a Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc. b Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. Note: You do not have to calculate the overhead that would be applied for the month of August using this alternative method.
Activitybased costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activitybased costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers activities Assume that the direct labor rate is $ per hour and that there were no beginning inventories. The following information was available for based on an expected production level of units for the year: Activity Budgeted Cost Driver Used Cost Cost Driver Costs for as Allocation Base Allocation Rate Materials handling $ Number of parts used $ per part Number of machine hours per hour Milling and grinding Assembly and inspection Testing Direct labor hours worked per hour Number of units tested per unit The following production, costs, and activities occurred during the month of August: Units ProducedTested Direct Materials Costs Number of Parts Used Machine Hours Direct Labor Hours Required: a Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc. b Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. Note: You do not have to calculate the overhead that would be applied for the month of August using this alternative method.
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