Kall Company produces cellular phones. It has just completed an order for 10,000 phones placed by Connect, Ltd. Kall recently shifted to an activity-based costing system, and its controller is interested in the impact that the ABC system had on the Connect order. Data for that order are as follows: direct materials, $36,950; purchased parts, $21,100; direct labor hours, 220; and average direct labor pay rate per hour, $15.
Under Kall€™s traditional costing system, overhead costs were assigned at a rate of 270 percent of direct labor cost.
Data for activity-based costing for the Connect order follow.

Required
1. Use the traditional costing approach to compute the total cost and the product unit cost of the Connect order. (Round unit costs to the nearest cent.)
2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level.
3. Prepare a bill of activities for the activity costs.
4. Use ABC to compute the total cost and product unit cost of the Connect order. (Round activity costs to the nearest dollar, and round unit costs to the nearest cent.)
5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC? Does the use of ABC guarantee cost reduction for everyorder?

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Activity Electrical engineering design Setup Parts production Product testing Packaging Building occupancy Assembly Activity Usage Cost Driver Engineering hours Number of setups Machine hours Number of tests Number of packages Machine hours Direct labor hours Activity Cost Rate $19 per engineering hour 32 engineering hours $29 per setup $26 per machine hour $32 per test $0.0374 per package $9.80 per machine hour $15 per direct labor hour 11 setups 134 machine hours 52 tests 10,000 packages 134 machine hours 220 direct labor hours