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After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze

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

Activity Cost Driver
Setting up machinfes $ 24,030 27 batches
Inspecting components $ 4,800 4,800 parts
Providing utilities $ 9,600 4,800 machine hours

Overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615.

Direct materials $ 2,100
Direct labor $ 3,500
Batches 5 batches
Number of parts 500 parts
Machine hours 610 machine hours

Required: 1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.

Setting up machines
Inspecting components
Providing utilities

2. What is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost?

Total cost

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

Total manufacturing cost

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