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 Don't use plagiarized sources. Get Your Custom Essay on compute the cost of 1 000 units of compo 24 using the current traditional costing sy 608875 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page | $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:
| Activity | Cost Driver | Expected Use |
| Materials handling | Weight of materials | 50,000 pounds |
| Machining | Machine horns | 20,000 hours |
| Factory supervision | Direct labor hours | 12,000 hours |
Instructions
(a)Compute the cost of 1,000 units of Compo-24 using the current traditional costing system.
(b)Compute the cost of 1,000 units of Compo-24 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.
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