The Green Iguana Manufacturing Company manufactures tools for special requests from its customers. The company uses machine hours (robot) as the basis for its "overhead" rate, currently it uses the traditional method to apply the "overhead" to its jobs.

The estimated or budgeted manufacturing overhead expenses (Budget) for the year 2021 are $ 130,000 and 30,000 budgeted machine hours (Budget). The current manufacturing overhead expenses for the year 2021 were $ 140,000 and 35,000 current machine hours, of which 11,000 hours are assigned to job # 123 and 14,000 to job # 456.

The chief accounting officer had learned about the new activity-based costing (ABC costing) technique, and he wonders if he could offer any advantage to his company by implementing this concept.

To implement ABC costing the following activities were budgeted.

Purchasing $ 25,000 Engineering $ 22,000 Material Handling $ 65,000 Setups $ 18,000 Machine Hrs $ 45,000 Tools Makers $ 35,000

The accounting director decided that the appropriate drivers for the general activities (manufacturing overhead) are the purchase orders for the purchasing activity, the number of configurations for the configuration activity (setups), the hours of engineering for engineering activity, machine hours for machine activity and movement of inventory components for material handling and tool hours for tool makers. .

The budgeted quantities for these drivers are 6,000 purchase orders (purchasing), 2,000 configurations (setups), 1,500 engineering hours, 12,000 machine hours for machine activity, and 16,000 components for material handling and 8,000 hours for tool makers. .

The company's cost department has been asked to prepare quotes for two jobs with the following information using both methods to apply the overhead, the traditional method and the ABC costing method to apply the overhead rate to the jobs. 123 and 456.

The information for Jobs 123 and 456 is as follows.

Job 123 Job 456 Beg. Balance $ 22,812 $ 26,336 Direct materials $ 19,350 $ 24,656 Direct Labor $ 10,115 $ 18,789 Number of purchase order 35 15 Number of setups 18 17 Number of engineering hours 35 15 Number of machine hours 325 440 Number of components 600 650 Tool makers hours 200 250

Required (50 points)

1. Using traditional costing, calculate the manufacturing overhead rate and calculate the total manufacturing cost for jobs 123 and 456.

2. Using Activity Based Costing (ABC Costing), calculate the overhead rates for the four activities and calculate the total manufacturing cost for the jobs. 123 and 456. Note: Round dollars to two decimal places.

Job # 123 Job # 456

Beg. Balance Direct materials Direct Labor Overhead Applied Total cost