1. Open Doors, Inc., produces two types of doors, interior and exterior. The companys simple costing system has two direct cost categories (materials and labor) and one indirect cost pool. The simple costing system allocates indirect costs on the basis of machine-hours. Recently, the owners of Open Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Open Doors production for the most recent year follows:

Interior Exterior

Units sold 3,200 1,800

Selling price $ 125 $ 200

Direct material cost per unit $ 30 $ 45

Direct manufacturing labor cost per hour $ 16 $ 16

Direct manufacturing labor-hours per unit 1.50 2.25

Production runs 40 85

Material moves 72 168

Machine setups 45 155

Machine-hours 5,500 4,500

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 Open Doors, four activities were identified as generating indirect costs: production scheduling, material handling, machine setup and assembly. Open Doors collected the following data related to the indirect cost activities:

Activity Activity Cost Activity Cost Driver

Production scheduling $95,000 Production runs

Material handling $45,000 Material moves

Machine setup $25,000 Machine setups

Assembly $60,000 Machine-hours

1. Calculate the cost of an interior door and an exterior door under the existing simple costing system(Plant-Wide OH Rate)

2. Calculate the cost of an interior door and an exterior door under an activity-based costing system