DATA INPUT
Anticipated overhead 710,000$
Anticipated direct labor 20,000 hours
Rate 35.50$
Medform
Estimated production volume 2,500 units
Direct-material cost 30$ per unit
Direct labor per unit 3 hours at 15.00$ per hour
Procel
Estimated production volume 3,125 units
Direct-material cost 45$ per unit
Direct labor per unit 4 hours at 15.00$ per hour
Orders Machine Product Inspection
Processing Processing Hours
Overhead 120,000 500,000 90,000.00$
Orders Machine Hours Inspection
Processed Worked Hours
Medform 350 23,000 4,000
Procel 250 27,000 11,000
Total 600 50,000 15,000
SOLUTION
1. Unit manufacturing costs:
Medform Procel
2. Activity-based overhead application rates: Activities Cost Application
Activity Cost Driver Rate
Order processing 120,000$ 600 200$
Activity Medform Procel
Order processing 70,000$ 50,000$
Medform Procel
Direct material 30$ 45$
Direct labor 45 60
Order processing, etc 129.60 123.52
Total cost 204.60 228.52
3. Comparing costing methods: Medform Procel
Activity-Based Total Cost 204.60$ 228.52$