Suppose Sunstar Corporation is one of Dell's circuit board suppliers. Sunstar currently uses traditional costing for making business decisions. At the urging of Dell, however, the company has decided to move to activity-based costing for circuit board production related to products PCB 124 and PCB 136. As one of the company's accountant, you have been asked to prepare a spreadsheet comparing the two costing methods for the next company board meeting. Your supervisor has given you the following quarterly data:
Total Indirect Costs for the Quarter:
Assembly $630,000
Soldering $270,000
Inspection $160,000
________________________________________PCB 124____________________PCV 136
Direct Costs (Materials, Labor.......................$162,400...............................$178,240
Machine Hours (assembly)..................................480....................................1,080
Number of units produced (soldering)...................6,000....................................4,000
Testing hours (inspection)................................6,000....................................8,000
Answer the following questions:
1. What is the total manufacturing cost per unit using traditional costing for PCB 124? For PCB 136? Use machine hours as the cost-allocation base.
2. What is the total manufacturing cost per unit using activity-based costing for PCB 124? For PCB 136?
3. What conclusions can be drawn from your spreadsheet results?