Blues Traveler Company sells electric razors. The companys home office is in Princeton, New Jersey. The company was founded in 2005 when John Popper invested $300,000 for 30,000 shares and Chan Kinchla invested $200,000 for 20,000 shares of common stock. The only other financing activities relate to a $500,000 bank loan from 1^st National Bank that accrues interest at six percent per year payable on January 1 each year that has an unpaid balance of $400,000. The loan is due on December 31, 2023.

The companys products are designed by engineers at the home office and manufactured in Asia. The company has 2 design engineers who are each paid $110,000 per year; 4 marketing employees who each earn salaries of $40,000 per year; 8 subcontractors who earn $10 per hour to actually build the razors and 6 truck drivers who earn $12 per hour to deliver the razors to the stores where they are sold directly to customers. The owners supervise the manufacturing and sales activities and handle all the administrative tasks but their only compensation is distributions of retained earnings at the end of the year if the company is profitable.

The Mens Razor has $5 of raw materials per unit, requires 1.5 direct labor hours per unit and should consume 15,000 annual machine hours and 52,000 annual factory manager hours. The Womens razor has $7 of raw materials, uses up 2 direct labor hours per unit and should consume 7,500 annual machine hours and 13,000 annual factory manager hours. John estimates $100,875 of indirect manufacturing costs will be incurred and has established the following cost pools and cost drivers and intends to allocate manufacturing overhead using an activity based costing system.

Activity	Estimated Costs	Cost Driver	Estimated Cost Driver Required for the Year
Factory Machinery Costs	$61,875	Machine Hours	22,500
Factory Building Costs	$39,000	Factory Manager Hours	65,000
	$100,875

John is thinking about registering with the SEC so that the company can trade its shares publicly. If the company goes public, John wants the company to issue 75,000 new shares at $20.00 each to generate $1,500,000 of new capital. The Mens Razor sells for $45.00 and the Womens model sells for $55.00. John expects to produce and sell 30,000 of the Mens Razor and 10,000 of the Womens Razor in the current year.

The depreciation of long-term assets is based on the straight-line method and each assets estimated useful life. The insurance costs are the monthly premium the company pays to GEICO. Home office utilities average about $650 per month. The truck drivers deliver the razors to the stores in lots of 5,000 razors each trip and each trip takes about 200 hours up and back. The factory machinery costs are twenty percent variable and eighty percent fixed. The factory building costs are sixty variable and forty percent fixed.

Home Office Building Depreciation	$8,500/Year
Home Office Computers Depreciation	$4,500/Year
Mens Razor Raw Materials	$5.00/Per Unit Produced
Womens Razor Raw Materials	$7.00/Per Unit Produced
Home Office Insurance	$21,000/Year
Home Office Utilities	$7,800/Year
Design Engineer Salaries	$110,000 annual/Per Engineer
Marketing Employee Salaries	$40,000 annual/Per EE
Interest on 1st National Loan	$24,000/Year
Truck Drivers Wages ($12 per hr)	$19,200/Year
Factory Machinery Costs	$61,875/Year
Home Office Property Taxes	$8,500/Year
Mens Razor Direct Labor	$15/Per Unit Produced
Womens Razor Direct Labor	$20/Per Unit Produced
Factory Building Costs	$39,000/Year
Trucks Depreciation	$5,000/Year

1- Classify the companys costs as either a manufacturing cost or nonmanufacturing cost (ignore federal corporate income taxes).

2 - Determine the total manufacturing and nonmanufacturing costs for the year based on the volume level given.

3 - Calculate the predetermined manufacturing overhead rate for each cost pool.