Skath Industries manufactures a variety of custom products. The company has traditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur $1,190,000 in total manufacturing overhead costs in the upcoming year and will use 14,000 machine hours. Up to this point, hazardous waste disposal fees have been absorbed into the plantwide manufacturing overhead rate and allocated to all products as part of the manufacturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted. Company management wants to implement an activity based costing system so that managers know the cost of each product, including its hazardous waste disposal costs. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: 5 (Click the icon to view the expected usage and costs.) During the year, Job 351 is started and completed. Usage for this job follows: (Click the icon to view the usage for Job 351.) Requirements Requirement 1. Calculate the cost of Job 351 using the traditional plantwide manufacturing overhead rate based on machine hours. Begin by calculating the predetermined manufacturing overhead rate. First, identify the formula used to compute the predetermined manufacturing overhead rate, then compute the rate. (Abbreviations used: MOH = manufacturing overhead) Estimated total MOH costs Estimated total machine hours Predetermined manufacturing overhead rate $ 85 1,190,000 / 14,000 Calculate the cost of Job 351. Job Cost Record Manufacturing JOB 351 Costs Direct materials 24,050 Direct labour. 1,750 10,625 Manufacturing overhead allocated .... 36,425 Total job cost Requirement 2. Calculate the cost of Job 351 using activity-based costing. Begin by calculating the allocation rate for each activity. First, determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each activity. (Abbreviations used: est. = estimated, MH=machine hours) Activity cost / allocation rate Total est. activity cost pool 560,000 Total est. activity allocation base 14,000 Mach, maintenance $ 4 $ 40 per MH Eng. change orders $ 90,000 3,000 $ 30 per order Waste disposal $ 540,000 / 2.000 $ 270 per kg Calculate the cost of Job 351 using activity-based costing. Job Cost Record Manufacturing Costs JOB 351 Maintenance costs Engineering costs Waste disposal costs 5000 330 14850 20180 Total job cost * More Info X 370 kg of direct materials @ $65 per kg 50 direct labour hours used @ $35 per labour hour 125 machine hours used 11 change orders 55 kg of hazardous waste generated Print Done X Data Table Description of cost pool Machine maintenance costs Engineering change orders Hazardous waste disposal Total overhead cost HA Estimated activity for this year 14,000 3,000 Estimated Cost Cost driver 560,000 Number of machine hours $ 90,000 Number of change orders 540,000 kg of hazardous materials generated $ 1,190,000 $ 2,000 Print Done