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2 The budgeted manufacturing overhead costs for Thomas Door Company for 200s are as follows COST AMOUNT TYPE OF COST Electricity 1,000,000 1,000,000 Work Cells Materials Handling Quality Control Inspections Product Runs (machine setups) Total budgeted overhead costs $6,000,000 For the last 5 years, the cost accounting department has been charging overhead production costs based on machine hours. The estimated budgeted capacity for 2003 Bruce Browne, managing director of Thomas Door Company, recently attended a seminar on activity-based costing. He now belijeves that ABC results in more reliable cost data that, in tun, will give the company an edge in pricing over its competitors. On the managing directors request, the production manager provided the following data regarding expected 2003 activity for the cost drivers of the preceding budgeted is 1,000,000 machine hours overhead costs ACTIVITY DRIVERS TYPE OF COST Electricity Work Cells Materials Handling Quality Control Inspections 100,000 600,000 200,000 100,000 50,000 Kilowatt hours Square metres Material moves Number of inspections Product runs Product Runs (machine setups) Barry Singh, the Marketing Manager, received an offer to sell 5,000 doors to a local construction company. There is available excess capacity in the manufacturing plant to cover this order. Barry asks the head of cost accounting to prepare cost estimates for producing the 5,000 doors. The head of cost accounting accumulated the following data concerning the production of 5,000 doors $100,000 $300,000 10,000 15,000 1,000 8,000 100 50 25 Direct materials cost Direct labour cost Machine hours Direct labour hours Electricity-kilowatt hours Work cells-square metres Number of materials handling moves Number of quality control inspections Number of product runs (setups)