MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $25 per hour and that there were no beginning inventories. The following information was available for 2010, based on an expected production level of 100,000 units for the year:

The following production, costs, and activities occurred during the month of August:

Required:
a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc.
b. Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct laborhours.

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Activity (Cost Driver) Budgeted Costs for 2010 $1.200,000 2,200,000 1,500,000 300,000 Cost Driver Used as Allocation Base Cost Allocation Rate S 2.00 per part Number of machine hours11.00 per hour 5.00 per hour 3.00 per unit Number of parts used Materials handling Milling and grinding Assembiy and inspection Testing Direct labor hours worked Number of units tested Units Direct Materials Costs $900,000 Number of Parts Used 62,000 Machine Hours 18,000 Direct Labor Hours 35,000 Produced Test ted 10,000