After reading an article about activity-based costing in a trade journal for the furniture industry^ Adria Lopez wondered if it was time to critically analyze overhead costs at Success Systems. In a recent months Lopez found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

COST DRIVER

Setting up machines............ $20,000 25 batches

Inspecting components ......... $ 7,500 5.000 parts

Providing utilities $10,000 5,000 machine hours

Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 6.15,

Direct materials.......... $2,500 Number of parts ......... 400 parts

Direct labor............................... $3,500 Machine hours........... 600 machine hours

Batches........____ ..... 2 batches

What is the total cost of Job 6.15 if Success Systems applies overhead at 50%." of direct labor cost?

What is the total cost of Job 6.15 if Success Systems uses activity-based costing?

Which approach to assigning overhead gives a better representation of the costs incurred to produce Job 6.15? Explain.