Question
HealthTech Incorporated manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials
HealthTech Incorporated manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $21 per hour and that there were no beginning inventories. The following information was available for 2022, based on an expected production level of 633,333 units for the year:
Activity Cost Driver | Budgeted Costs for 2022 | Cost Driver Used as Allocation Base | Cost Allocation Rate | |
---|---|---|---|---|
Materials handling | $ 5,100,000 | Number of parts used | $ 1.75 | per part |
Milling and grinding | 8,900,000 | Number of machine hours | 13.50 | per hour |
Assembly and inspection | 6,200,000 | Direct labor hours worked | 4.50 | per hour |
Testing | 1,900,000 | Number of units tested | 3.00 | per unit |
The following production, costs, and activities occurred during the month of April:
Units Produced/Tested | Direct Materials Costs | Number of Parts Used | Machine Hours | Direct Labor Hours |
---|---|---|---|---|
50,000 | $ 3,200,000 | 285,000 | 93,000 | 165,000 |
Required:
A. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of April for HealthTech.
Note: Round "Cost per unit" to 2 decimal places.
B. Which of the following are the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. (Note: You do not have to calculate the overhead that would be applied for the month of April using this alternative method.)
Note: You may select more than one answer. .
check all that apply
_ ABC does not help in decision-making.
_ ABC systems produce more accurate financial information.unanswered
_ ABC approach is likely to provide better information to manufacturing managers.unanswered
_ABC helps in decision-making.unanswered
_ABC systems produce more accurate product costing information.unanswered
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