Activity-based costing versus traditional overhead allocation methods [LO 9]
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Galvaset Indutries manufactures and sells custom-made windows. Its 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 . Assume that the direct labor rate is $20 per hour and that 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 for 2010 |
Cost Driver Used
as Allocation Base |
Cost
Allocation Rate |
| Materials handling |
$ |
325,000 |
|
Number of parts used |
$ |
0.25 |
per part |
| Cutting and lathe work |
|
2,340,000 |
|
Number of parts used |
|
1.80 |
per part |
| Assembly and inspection |
|
5,000,000 |
|
Direct labor hours |
|
25.00 |
per hour |
|
|
The following production, costs, and activities occurred during the month of March:
|
Units
Produced |
Direct
Materials Costs |
Number
of Parts Used |
Direct
Labor Hours |
| 3,800 |
$142,000 |
83,600 |
17,180 |
|
| Required: |
| (a) |
Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of March (using the activity-based costing approach). (Round "cost per unit produced" to 2 decimal places and the rest to the nearest dollar amount. Omit the "$" sign in your response.)
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