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##### Calculate the total manufacturing cost and the cost per unit for the month of August

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Question

Baja Industries has recently switched its method of applying manufacturing overhead from a single predetermined overhead rate based on direct labor hours to activity-based costing (ABC). Assume that the direct labor rate is \$18.00 per hour and that there were no beginning inventories. The following cost drivers and rates have been developed for allocating manufacturing overhead costs;Activity Cost Driver Rate;Material handling Number of parts used \$2.00 per part;Assembly and inspection Number of direct labor hours \$25.00 per DLH;Testing Number of units tested \$5.00 per unit;The following production, costs, and activities occurred during the month of August;Direct Number of;Units Produced Material Cost Parts Used Direct Labor Hours;6,400 \$208,600 142,000 26,480;(a.) Calculate the total manufacturing cost and the cost per unit for the month of August.;(b.) Assume instead that Baja Industries applies manufacturing overhead on the basis of \$40.00 per direct labor hours (rather than the ABC method). Calculate the total manufacturing overhead cost applied for the month of August.;(c.) Which method of applying overhead do you think provides better information for manufacturing managers?

Paper#20423 | Written in 18-Jul-2015

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