is of machine-hours. 5-24 Activity-based costing manufacturing, Fancy Doors, Inc., produces two types of doors, into and exterior. The company's simple costing system has two direct cost categories (materials and labor one indirect cost pool. The simple costing system allocates indirect costs on the basis of machine Recently, the owners of Fancy Doors have been concerned about a decline in the market share for interior doors, usually their biggest seller. Information related to Fancy Doors production for the mostra year follows: Act Interior 3,200 $ 250 $ 60 S 32 1.50 Exterior 1,800 $ 400 S 90 S 32 2.25 Units sold Selling price Direct material cost per unit Direct manufacturing labor cost per hour Direct manufacturing labor-hours per unit Production runs Material moves Machine setups Machine-hours Number of inspections 45 168 155 4,500 150 5,500 250 The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect cost pool for Fancy Doors, the owners identily S tities as generating indirect costs: pro duction scheduling, material handling, machine setup, assambl a don, and marketing. Fancy Doors collected the following data related to the indirect costat Activity Production scheduling Material handling Machine setup Assembly Inspection Activity Cost $190,000 $ 90,000 $ 50,000 $120,000 $ 16,000 Activity Cost Driver Production runs Material moves Machine setups Machine-hours Number of inspections uired Marketing costs were determined to be 3% of the sales revenue for each type of door 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 an activity-based costing system 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based cos systems differ in the cost of an interior and exterior door? 4. How might Fancy Door, Inc., use the new cost information from its activity-based costing system address the declining market share for interior doors