• Activity-Based Job Costing Unit-Cost Comparisons (adapted from Horngren, Foster, and Datar: Cost Accounting - A Managerial Emphasis, 10th Edition) The Tracy Corporation has a machining facility specializing in jobs for the aircraft components market. The pervious job costing system had two direct-cost categories (direct materials and direct manufacturing labor) and a single indirect￾cost pool (manufacturing overhead, allocated using manufacturing labor-hours). The indirect cost-allocation rate of the previous system for 2001 would have been $115 per direct manufacturing labor-hour. Recently a team with members from product designs, manufacturing, and accounting used an activity-based costing (ABC) approach to refine its job-costing system. The two direct-cost categories were retained. The team decided to replace the single indirect-cost pool with five indirect-cost pools. The pools represent five activity areas at the facility each with its own supervisor and budge responsibility. Pertinent data are as follows: Activity Area Cost Allocation Base Cost-Allocation Rate Material handing Lathe work Milling Grinding Testing Turns Parts Turns Machine-hours Parts Units tested $ 0.40 0.20 20.00 0.80 15.00 Information-gathering technology has advanced to the point where the data necessary for budgeting in these five activity areas are collected automatically. Two representative jobs processed under the new system at the facility in the most recent period had the following characteristics: Job 410 Job 411 Direct materials costs per job Direct manufacturing labor costs per job Number of direct manufacturing labor-hours per job Parts per job Turns per job Machine-hours per job Units per job (all units are tested) $ 9,700 $750 25 500 20,000 150 10 $59,900 $11,250 375 2,000 60,000 1,050 200 REQUIRED: 1. Compute the per unit manufacturing costs of each job under the previous job-costing system. 2. Compute the per unit manufacturing costs of each job under the activity-based costing system. 3. Compare the per unit cost figures for jobs 410 and 411 computed in requirements 1 and 2. Why do the previous and the activity-based costing system differ in their job cost estimates for each job? Why might these differences be important to Tracy Corporation? 4. How might Tracy Corporation use information from its ABC system to manage its business better?