The manufacturing company prepares the following budget for 2020.

Machining Finishing

Factory overhead $ 96,000 $ 200,000

Machine hours 6000 840

Direct labour cost $ 60,000 $ 400,000

This company uses a predetermined overhead rate for applying overhead based on machine hours for 'machining' and direct labour cost for 'finishing'.

You are given the following actual information about one job:

Machining Finishing

Direct materials used $ 11,000 $ 3,000

Machine hours 300 40

Direct labour cost $ 10,000 $ 20,000

Required:

(1) Compute the total cost (full cost) for this job.

(2) Why we need to develop Activity-based costing