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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
Machine hours
20,000 hours
Direct labor hours
12,000 hours
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