Alex Erwin started Inter wood, a niche furniture brand, 10 years ago. He ran the business as a sole proprietorship. While he has 50 skilled carpenters and 5 salesmen on his payroll, he has been taking care of the accounting by himself. Now, he intends to offer 40% of the ownership to public in next couple years, and is willing to make changes and has hired you as the management accountant to organize and improve the accounting systems.

Inter wood's total budgeted manufacturing overheads cost for the current year is $5,404,639 and budgeted total labor hours are 20,000. Alex applied traditional costing method during all of the 10 years period, and based the per-determined overhead rate on total labor hours.

Inter wood's sofa range includes the 2-set, 3-set and 6-set options. Platinum Interiors recently placed an order for 150 units of the 6-set type. The order is expected to be delivered in 1 month time. Since it is a customized order, Platinum will be billed at cost plus 25%.

You are not a fan of traditional product costing system. You believe that the benefits of activity-based costing system exceeds its costs, so you sat down with Aaron Mason, the chief engineer, to identify the activities which the firm undertakes in its sofa division. Next, you calculated the total cost that goes into each activity, identified the cost driver that is most relevant to each activity and calculated the activity rate. The results are summarized below:

Activity	A (in $)	Relevant Cost Driver	B	/B (in $)
Production of components	2,313,132	Machine hours	25,000	93
Assembly of components	1,231,312	Number of labor hours	20,000	62
Packaging	213,123	Units	5,000	43
Shipping	231,230	Units	5,000	46
Setup costs	34,243	Number of setups	240	143
Designing	123,132	Designer hours	1,000	123
Product testing	24,234	Testing hours	500	48
Rent	1,234,233	Labor cost	$1,645,644	75%

Once the order was ready for packaging, Aaron gave you a summary of total cost incurred and a statement of activities performed (also called the bill of activities) as shown below:

Order No: 15X2013 Customer: Platinum Interiors Units: 150 Type: 6 unit Amounts in $
Cost of direct materials	25,000
Cost of purchased components	35,000
Labor cost	15,600
Activity	Relevant Cost Driver	Activity Usage
Production of components	Machine hours	320
Assembly of components	Number of labor hours	250
Packaging	Units	150
Shipping	Units	150
Setup costs	Number of setups	15
Designing	Designer hours	70
Testing Testing hours	22
Rent	Labor cost	4500

Part A

Calculate the total cost of the order and the invoice value of the order based on traditional costing system.