I need some assistance calculating manufacturing overhead.
Problem: Mathewson Industries has recently switched its method of applying manufacturing overhead from a single predetermined overhead rate based on direct labor hours to activity-based costing (ABC). Assume that the direct labor rate is $18.00 per hour and that there were no beginning inventories. The following cost drivers and rates have been developed for allocating manufacturing overhead costs:
Activity Cost Driver Rate
Material handling Number of parts used $2.00 per part
Assembly and inspection Number of direct labor hours $25.00 per DLH
Testing Number of units tested $5.00 per unit
The following production, costs, and activities occurred during the month of August:
Direct Material Number of Direct Labor
Units Produced Cost Parts Used Hours
6,400 $208,600 142,000 26,480
Required:
Q1. Calculate the total manufacturing cost and the cost per unit for the month of August.
Q2. Assume instead that Mathewson Industries applies manufacturing overhead on the basis of $40.00 per direct labor hours (rather than the ABC method). Calculate the total manufacturing overhead cost applied for the month of August.