Cogswell Cogs, Inc. estimates its overhead for the upcoming year to be $1,693,500 and will use machine hours as its base to apply overhead and estimates total machine usage will be 112,000 hours and estimates direct labor hours will be 43,500 hours. Cogswell makes three different models of its product - Basic, Premium and Deluxe. The company anticipates making 10,000 units of Basic, 5,000 units of Premium and 1,000 units of Deluxe. The following information relates to Direct Material and Direct Labor for each unit for each model -

BasicPremiumDeluxe

Direct Material5 pounds @ $4/pound8 pounds @ $4.20/pound 10 pounds @ $4.40/pd

Direct Labor2.5 hours @ $16/hour3 hours @ $16/hour3.5 hours @ $18/hour

Overhead6 machine hours 8 machine hours12 machine hours

Mr. Cogswell, the President and CEO of Cogswell Cogs, Inc. has been reading about Activity-based Costing (ABC) and thinks that perhaps the company should adopt it. He asked you to gather up information regarding the cost drivers in the factory and here is what you found -

CostsCost DriverBasicPremiumDeluxe

Material handling$36,000Deliveries50 deliveries25 deliveries15 deliveries

Setup costs$66,000Production runs24 runs16 runs10 runs

Supervisors' salaries$550,000 DL hours 55,000 hours40,000 hours30,000 hours

Utilities$660,000Machine hours54,000 hours48,000 hours18,000 hours

Inspection costs$72,000Inspection hours 2000 hours1000 hours600 hours

Rent$220,000Floor space4,000 feet7,000 feet9,000 feet

Engineering$134,000Engineering hours2,000 hours3,000 hours5,000 hours

Using ABC costing, calculate total overhead dollars to be charged to each product, then at bottom calculate the total cost per unit, circle your final answer.

Cost PoolsBasicPremiumDeluxe

Material handling

Setup costs

Supervisors' salaries

Utilities

Inspection costs

Rent

Engineering

Total Overhead in $

Total Overhead per unit

What is TOTAL COST per unit for each model using ABC?

Basic - Premium - Deluxe -