AirComp Corporation produces component parts for the aircraft industry. The company follows a job-costing system consisting of direct materials and direct labor cost and manufacturing overhead costs that are allocated to specific active jobs in-process.

Until fiscal year 20x1, The company allocated manufacturing overhead to production jobs using a single-indirect cost allocation rate, which is based on direct labor hours. In the budgeting process for 20x1, they used that approach based on the following estimates: factory overhead and direct labor hours, for 20x1, will be $150,000 and 10,000 hours, respectively.

In 20x1, the Company decided to change the method of allocating manufacturing overhead to production jobs from the single-indirect cost allocation approach to the activity-based costing (ABC) indirect cost allocation approach. For purposes of developing the ABC allocation rates, AirComps cost accounting team prepared the following analysis:

Activity	Cost Driver	Allocation Rate
Material handling	No. of parts ground	$0.40
Lathe work	No. of lathe turns	$0.20
Milling	Machine hours	$20.00
Grinding	No. of parts ground	$0.80
Testing	No. of units tested	$15.00

For January of 20x1, AirComps actual costs and activities for Job 100 and Job 200, the only production jobs in process for the period:

	Job 100	Job 200
Direct materials cost	$9,700	$59,900
Direct labor cost	$750	$11,250
No. of direct manufacturing labor hours	25	375
No. of parts ground	500	2,000
No. of lathe turns	20,000	60,000
Machine hours	150	1,050
No. of units produced during period (all are tested)	10	200

To understand the financial implications of changing to activity-based costing, in 20x1, the company will prepare allocation schedules comparing both methods for allocating manufacturing overhead to production.

Required

A. For each job, determine total cost and the cost per unit cost using direct labor hours to allocate manufacturing overhead to each job.

B. For each job, determine total cost and cost per unit cost using an activity-based costing approach to allocate manufacturing overhead cost to job.

C. Compare the per unit cost figures for each job computed in step a. and step b., and discuss the change in cost allocation, i.e., what was the implications of the cost allocation method change on the amount of per unit cost allocated to each job.

D. How might AirComp Corporation use the information from ABC allocation approach to better manage indirect production costs?