Sunshine Ltd has estimated the following activity cost pools and activity drivers for the coming year:

Activity

Budgeted overhead cost

Activity driver

Budgeted level for activity driver

Machine setups

$200,000

No. of setups

100 setups

Material handling

$100,000

Weight of raw material

50,000 kilograms

Hazardous waste control

$50,000

Weight of hazardous chemicals used

10,000 kilograms

Quality control

$75,000

No. of inspections

1,000 inspections

Other overhead costs

$200,000

Machine hours

20,000 machine hours

TOTAL

$625,000

Sunshine Ltd has received an order for 1000 boxes of film development chemicals. In addition to direct material costing $120 per box and direct labour costing $40 per box, the order has the following production requirements:

Machine setups4 setups

Raw material10,000 kilograms

Hazardous materials2,000 kilograms

Inspections10 inspections

Machine hours500 machine hours

Required:

(a)If Sunshine Ltd were to use a plantwide predetermined overhead rate based on machine hours, compute the total manufacturing cost of the order. Please show all calculations.

[Answer and show workings here]

Predetermined overhead rate = 625 000/ 20 000 = $31.25

Total manufacturing overhead cost of job = 1000*120 + 1000*40 + 500*31.25 = $175625

(b)Compute the total manufacturing cost of the order using activity-based costing. Please show all calculations.

[Answer and show workings here]

(c)Which costing system do you recommend? Why?

[Answer here]