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International Steel Company has budgeted manufacturing overhead costs of $1,947,000. It has allocated overhead on a plant-wide basis to its two products (soft steel and
International Steel Company has budgeted manufacturing overhead costs of $1,947,000. It has allocated overhead on a plant-wide basis to its two products (soft steel and hard steel) using machine hours, which are estimated to be 100,000 for the current year. The company has decided to experiment with activity-based costing and has created five activity cost pools and related activity cost drivers as follows: Activity Centre Cost Driver Estimated Overhead Estimated Activity Material handling Purchase orders Number of moves $282,000 47,000 moves Number of orders $112,000 1,600 orders Product testing Number of tests $418,000 3,800 tests Machine set-up Number of set-ups $325,000 5,000 set-ups Machining Machine hours $810,000 100,000 machine hours Each unit of the products requires the following: Soft Steel Hard Steel Direct materials costs $300 $200 Soft Steel Hard Steel Direct materials costs $300 $200 Direct labour costs $120 $60 Purchase orders 2 3 Machine set-up 5 10 Product testing 3 4 Machining 100 100 Material handling 4 6 (a) Under traditional product costing using machine hours, calculate the total manufacturing cost per unit of both products. (Round answers to O decimal places, e.g. 1525.) Total manufacturing cost per unit $ Soft Steel Hard Steel $
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