Galvaset Industries manufactures and sells custom-made windows. It's job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning three manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $20 per hour and there were no beginning inventories. The following information was available for 2010, based on an expected production level of 50,000 units for the year, which will require 200,000 direct labor hours.
Activity (Cost Driver) Budgeted Costs Cost Driver Used Cost
(Cost Driver) For 2010 as Allocation base AllocationRate
Materials Handling $320,000 # of parts used $0.25 per part
Cutting and Lathe work 2,340,000 # of parts used $1.80 per part
Assembly and Inspection 5,000,000 Direct Labor hours $20.00 per hr.
The following production, costs, and activities occurred during March:
Units Produced - 3,800
Direct Materials Cost - $142,000
# of Parts Used - 83,600
Direct Labor Hours - 17,180
A.) Calculate the total manufacturing costs and the cost per unit of the windows produced during March (using the activity-based costing approach).
B.) Assume instead that Galvaset Industries applies the manufacturing overhead on a direct labor hours basis (rather than using the activity-based costing system previously described), Calculate the total manufacturing cost and the cost per unit of the windows produced during March. (Hint - You will need to calculate the predetermined overhead application rate using the total budgeted overhead costs for 2010.)