Dandy Doors, Inc., produces two types of doors, interior and exterior. The company's simple costing system has two direct cost categories (materials and labor) and one indirect cost pool. The simple costing system allocates indirect costs on the basis of machine-hours. Recently, the owners of Dandy Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Dandy Doors production for the most recent year follows:

Interior Exterior

Units sold

3,200

1,800

Selling price

$150

$225

Direct material cost per unit

$60

$75

Direct manufacturing labor cost per hour

$18

$18

Direct manufacturing labor-hours per unit

1.30

2.30

Production runs

30

65

Material moves

70

160

Machine setups

35

150

Machine-hours

6,000

4,000

Number of inspections

220

140

1.	Calculate the cost of an interior door and an exterior door under the existing simple costing system.
2.	Calculate the cost of an interior door and an exterior door under anactivity-based costing system.
3.	Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior and exteriordoor?
4.	How might DandyDandy Doors, Inc., use the new cost information from itsactivity-based costing system to address the declining market share for interiordoors?