Kowalski Company manufactures a number of specialized machine parts. Part Compo-
ID: 2415213 • Letter: K
Question
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.
a. Compute the cost of 1,000 units of Compo-24 using the current traditional costing system.
Total cost:
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.
Total cost:
Explanation / Answer
Solution:
Application Rate:
(A). Material Hndling:
Cost Pool / Cost Drivers
= 1,50,000 / 50,000
= 3
(B). MachininG:
Cost Pool / Cost Driver
= 1,80,000 / 20,000
= 9
(C). Factory Supervision:
Cost Pool / Cost Driver
= 1,38,000 / 12,000
= 11.5
(B). Total Cost:
Material Handling = 20,000
Machine Hours = 40,000
Labour Hours = 12,000
Cost = 72,000
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