number of ma D. Determine the activity cost of a routine trip and a maintenance hour for the month given. Round answers to the nearest cent. C. Determine the operating costs assigned and reassigned to machines / and & when activity-based costing is used. d. How can ABC cost information be used by Banctronics Inc. to improve the overall management of monthly operating costs? 9-32. Product Costing: Plantwide Overhead versus Activity-Based Costing Sterling Industries produces machine parts as a contract provider for a large manufacturing company Sterling produces two particular parts, shafts and gears. The competition is keen among contract pro- ducers, and Sterling's top management realizes how vulnerable its market is to cost-cutting competitors Hence, having a very accurate understanding of costs is important to Sterling's survival. Sterling's president, Sheila Hudson, has observed that the company's current cost to produce shafts is $21.41, and the current cost to produce gears is $12.73. She indicated to the controller that she suspects some problems with the cost system because Sterling is suddenly experiencing extraordinary competition on shafts, but it seems to have a virtual corner on the gears market. She is even considering dropping the shaft line and converting the company to a one-product manufacturer of gears. She asked the controller, George Coleman, to conduct a thorough cost study and to consider whether changes in the cost system are necessary. The controller collected the following data about the company's costs and various manufacturing activities for the most recent month: Shafts Gears Production units . . 47,000 16,000 Selling price . . . $31.95 $23.50 Overhead per unit (based on direct labor hours) $12.34 $6.25 Materials and direct labor cost per unit . . $9.07 $6.48 Number of production runs . ... 15 25 Number of purchasing and receiving orders processed 50 110 Number of machine hours . . ... 12,750 6,000 Number of direct labor hours . . .. 29,000 5,000 Number of engineering hours. 5,000 5,000 Number of material moves. . . 40 30Module 19 Activity-Based Costing, Customer Profitability, and Activity-Based Management pools: The controller was able to summarize the company's total manufacturing overhead into the following Setup costs . . Machine costs . . . . $ 40,000 Purchasing and receiving costs . 180,000 Engineering costs. . . 200,000 Materials handling costs 190,000 Total .. 70,000 $680,000 Required a. Calculate Sterling's current plantwide overhead rate based on direct labor hours. b. Verify Sterling's calculation of overhead cost per unit of $12.34 for shafts and $6.25 for gears. c. Calculate the manufacturing overhead cost per unit for shafts and gears using activity-based costing assuming each of the five cost pools represents a separate activity pool. Use the most appropriate activity driver for assigning activity costs to the two products. d. Comment on Sterling's current cost system and the reason the company is facing fierce competition for shafts but little competition for gears. 33. Customer Profitability Analysis Remington Aeronautics LTD is a British aeronautics subcontract company that designs and manufa tures electronic control systems for commercial airlines. The vast majority of all commercial aircraft a manufactured by Boeing in the U.S. and Airbus in Europe; however, there is a relatively small gro of companies that manufacture narrow-body commercial jets. Assume for this exercise that Remingto does contract work for the two major manufacturers plus three companies in the second tier. Because competition is intense in the industry, Remington has always operated on a fairly thin 20 gross profit margin; hence, it is crucial that it manage non-manufacturing overhead costs effectively order to achieve an acceptable net profit margin. With declining profit margins in recent years, Remi ton Aeronautics' CEO, John Remington, has become concerned that the cost of obtaining contracts a maintaining relations with its five major customers may be getting out of hand. You have been hired onduct a customer profitability analysis. juties' non-manufacturing overhead consists of $2.5 million of general and expenses, the CEO's salary and bonus and of $3 mil