Activity-based costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. 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 four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $25 per hour and that there were no beginning inventories. The following information was available for 2010, based on an expected production level of 100,000 units for the year: Activity Budgeted Cost Driver Used Cost (Cost Driver) Costs for 2010 as Allocation Base Allocation Rate Materials handling $1,200,000 Number of parts used $ 2.00 per part Number of machine hours 11.00 per hour Milling and grinding 2,200,000 Assembly and inspection 1,500,000 Testing 300,000 Direct labor hours worked 5.00 per hour Number of units tested 3.00 per unit The following production, costs, and activities occurred during the month of August: Units Direct Number Machine Direct Produced/Tested Materials Costs of Parts Used Hours Labor Hours 10,000 $900,000 62,000 18,000 35,000 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.)