Problems P8.33 Traditional and activity-based product costing: manufacturer The accountant for Snappy Photographic Supply Ltd has estimated the following activity cost pools and activity drivers for the coming year: LO8.5 8.6 Budgeted overhead cost Budgeted level for activity driver 100 Activity Machine setups Material handling Hazardous waste control $300000 150000 75000 Activity driver No. of setups Weight of raw material Weight of hazardous chemicals used No. of inspections Machine hours Cost per unit of activity driver $3000 per setup $3 per kilogram $7.50 per kilogram 50 000 kilograms 10000 kilograms 112 500 1000 Quality control Other overhead costs Total $112.50 per inspection $15 per machine hour 300000 20000 $937 500 An order for 1000 boxes of film development chemicals has the following production requirements: 4 setups Machine setups Raw material Hazardous materials Inspections Machine hours 10000 kilograms 2000 kilograms 10 inspections 500 machine hours Required: 1. Calculate the total overhead that should be assigned to the order for development chemicals. 2. What is the overhead cost per box of chemicals? 3. If Snappy Photographic Supply were to use a plantwide predetermined overhead rate based on machine hours, calculate the rate per hour. 4. Under the approach in requirement 3, how much overhead would be assigned to the order for development chemicals: (a) in total (b) per box of chemicals? 5. Explain why these two product costing systems result in such widely differing costs. Which system do you recommend? Why? 6. Calculate the unit cost of a production order for 100 specially coated plates used in film development. In addition to direct material costing $180 per plate and direct labour costing $60 per plate, the order requires the following: Machine setups Raw material Hazardous materials Inspections Machine hours 2 setups 800 kilograms 300 kilograms 3 inspections 50 machine hours