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After reading an article on activity-based costing in a furniture industry trade magazine, Santana Rey wondered if it was time to take a critical look

After reading an article on activity-based costing in a furniture industry trade magazine, Santana Rey wondered if it was time to take a critical look at overhead costs in Business Solutions. In a recent month, Rey discovered that installation costs, inspection costs and utility costs made up the majority of her overhead. Additional information on overhead is included below.

Activity
CostConductor
Machine configurationps14,20020lots
component inspectionps4,9004,900parts
utility supplyps9,8004,900machine hours

Overhead costs have been applied to production at a rate of 60% of direct labor costs. The following data belongs to Work 6.15.





Direct materialsps2,800
Direct labourps4,000
lots
7lots
Number of pieces
460parts
machine hours
570machine hours


Required :
1.

Classify each of your three general activities as a unit level, lot level, product level, or facility level.



Machine configuration
In component inspection
utility supply

2.

What is the total cost of job 6.15 if Business Solutions applies overhead at 60% of the direct labor cost?



3.

What is the total cost of job 6.15 if Business Solutions uses activity-based costing? 

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