Exercise
Kowalski Company manufactures a number of specialized machine parts. Part Compo-24 uses $35 of direct materials and $15 of direct labor per unit. Kowalski's estimated manufacturing overhead is as follows.
|
Materials handling
|
$150,000
|
|
Machining
|
180,000
|
|
Factory supervision
|
138,000
|
|
Total
|
$468,000
|
Overhead is applied based on direct labor costs, which were estimated at $200,000.
Kowalski is considering adopting activity-based costing. The cost drivers are estimated at:
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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
|
Compute the cost of 1,000 units of Compo-24 using the current traditional costing system.