.Bright Window Company designs and builds custom windows for luxury homes. Most of the windows are custom made but occasionally the company does mass production on order. Its budgeted manufacturing overhead costs for the year 2011 are as follows:

Overhead Cost Pools Amount

Purchasing $ 180,000

Production (cutting, milling, finishing) 400,000

Setting up machines 135,000

Inspecting 160,000

Utilities 300,000

Total budget overhead costs $1,175,000

For the last three years, the company has been charging overhead to products on the basis of machine hours. For the year 2011, 100,000 machine hours are budgeted.

Susan Craft, owner-manager of Bright Window, recently directed her accountant to implement the activity-based costing system she has repeatedly proposed. At Susan's request, the accountant and production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

Overhead Cost Pools Activity Cost Drivers Total Drivers

Purchasing Number of orders 500

Production (cutting, milling, finishing) Direct labor hours 80,000

Setting up machines Number of setups 1,000

Inspecting Number of inspections 5,000

Utilities Square feet occupied 75,000

During this month, the company received an order for 50 window sets from a housing development contractor. The accountant prepares cost estimates for producing components for 50 window sets so Susan can submit a contract price per window set to the contractor. The following data for the production of 50 window sets is accumulated:

Direct materials $120,000

Direct labor $135,000

Machine hours 12,000

Direct labor hours 10,000

Number of purchase orders 50

Number of machine setups 80

Number of inspections 380

Number of square feet occupied 7,000

Instructions

(a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.

(b) Compute the manufacturing cost per window set under traditional costing.

(c) Compute the manufacturing cost per window set under the proposed activity-based costing.