Calculate the cost of 1000 units of bunkka-22 using the

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Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit.

Mathias' estimates manufacturing overhead is as follows:

Materials handling

$100,000

Machining

200,000

Factory supervision

150,000

Total

$450,000

Overhead is applied based on direct labor costs, which were estimated at $200,000.

Mathias is considering adopting activity-based costing. The cost drivers are estimated at:

Activity

Cost Driver

Expected Use

Materials Handling

Weight of materials

50,000 pounds

Machining

Machine hours

20,000 hours

Factory supervision

Direct labor hours

12,000 hours

  1. Compute the cost of 1,000 units of Bunkka-22 using the current traditional costing system.
  2. Compute the cost of 1,000 units of Bunkka-22 using the proposed activity-based costing system. Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000 direct labor hours.

Reference no: EM13452570

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