After reading an article on activity-based costing in a furniture industry trade magazine, Santana Rey wondered if it was time to take a critical look at overhead costs in Business Solutions. In a recent month, Rey discovered that installation costs, inspection costs and utility costs made up the majority of her overhead. Additional information on overhead is included below.

Activity		Cost	Conductor
Machine configuration	ps	14,200	20	lots
component inspection	ps	4,900	4,900	parts
utility supply	ps	9,800	4,900	machine hours

Overhead costs have been applied to production at a rate of 60% of direct labor costs. The following data belongs to Work 6.15.

Direct materials	ps	2,800
Direct labour	ps	4,000
lots		7	lots
Number of pieces		460	parts
machine hours		570	machine hours

Required :

1.	Classify each of your three general activities as a unit level, lot level, product level, or facility level.

Machine configuration
In component inspection
utility supply

2.	What is the total cost of job 6.15 if Business Solutions applies overhead at 60% of the direct labor cost?

3.	What is the total cost of job 6.15 if Business Solutions uses activity-based costing?

Answer rating: 100% (QA)

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