Problem
Sullivan Company produces mathematical and financial calculators and operates at capacity. Data related to the two products follows.
|
Mathematical
|
Financial
|
|
Annual production in units
|
25,000
|
50,000
|
|
Direct materials cost
|
$75,000
|
$150,000
|
|
Direct manufacturing labor cost
|
$25,000
|
$50,000
|
|
Direct manufacturing labor-hours
|
1,250
|
2,500
|
|
Machine-hours
|
40,000
|
70,000
|
|
Number of production runs
|
50
|
50
|
|
Inspection hours
|
1,200
|
800
|
Total manufacturing overhead costs? are:
Total
Machining costs $440,000
Setup costs 110,000
Inspection costs 120,000
Requirements
1. Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product.
2. Compute the manufacturing cost per unit for each product.
3. How might Sullivan?'smanagers use the new cost information from its?activity-based costing system to better manage its? business?