Chapter 17-3

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Activity Cost $23,800 $4,600 4,600 parts $ 9,200 4,600 machine hours Driver Setting up machinfes Inspecting components Providing utilities 28 batches overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615 Direct materials Direct labor Batches Number of parts Machine hours $2,300 $3,300 4 batches 410 parts 530 machine hours Required: 1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level Setting up machines Inspecting components Providing utilities atch level Unit level acility level 2, what is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost? Total cost 3. What is the total cost of Job 615 if Business Solutions uses activity-based costing? Total manufacturing cost