Question
Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit. Mathias estimated
Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit.
Mathias estimated manufacturing overhead is as follows:
Materials handling $100,000
Machining 200,000
Factory supervision 150,000
Total $450,000
Overhead is applied based on direct labor costs, which were estimated at $200,000.
Mathias is considering adopting activity-based costing. The cost drivers are estimated at:
Activity Cost Driver Expected Use
Materials handling Weight of materials 50,000 pounds
Machining Machine hours 20,000 hours
Factory supervision Direct labor hours 12,000 hours
(a) Compute the cost of 1,000 units of Bunkka-22 using the current traditional costing system.
Total cost of Bunkka-22 $ ??
(b) Compute the cost of 1,000 units of Bunkka-22 using the proposed activity-based costing system. Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000 direct labor hours. (Round intermediate calculations to 2 decimal places, e.g. 1.25.)
Total cost of Bunkka-22 $ ??
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