Activity-based costing Med Tech, Inc manufactures and sells diagnostic equip Problem 13.21 Lo 9 ment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumu- lated separately, along with information concerning four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is S20 per hour and that there were no beginning inventories. The following information was available 2016, based on an expected production level of 400,000 units for the year: Activity Budgeted Cost Driver Used Cost Cost Driver Costs for 2016 as Allocation Base Allocation Rate $3,600,000 Number of parts used 1.50 per part Materials handling Milling and grinding 8,800,000 Number of machine hours 11.00 per hour Assembly and inspection 6,000,000 Direct labor hours worked 5.00 per hour Testing 1,200,000 Number of units tested 3.00 per unit The following production, costs, and activities occurred during the month of August Units Direct Number Direct ne Produced/Tested Materials Costs of Parts Used Hours Labor Hours 50.000 $3,500,000 275.000 95.000 160.000 Required a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for Med Tech, Inc b. Explain the advantages of the ABC approach relative to using a single predeter- mined 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.) Problem 13.22 Activity-based costing versus traditional overhead allocation methods Lo 9 Woodland Industries manufactures and sells custom-made windows. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning three manufacturing overhead cost drivers (activities). Assume that the direct labor rate is