Ivanhoe Steel Company has budgeted manufacturing overhead costs of $1,933,000. It has allocated overhead on a plant-wide basis to its two products (soft steel and hard steel) using machine hours, which are estimated to be 100,000 for the current year. The company has decided to experiment with activity-based costing and has created five activity cost pools and related activity cost drivers as follows:

Activity Centre		Cost Driver		Estimated Overhead		Estimated Activity
Material handling		Number of moves		$280,000			40,000	moves
Purchase orders		Number of orders		$105,000			1,400	orders
Product testing		Number of tests		$418,000			3,800	tests
Machine set-up		Number of set-ups		$320,000			5,000	set-ups
Machining		Machine hours		$810,000			100,000	machine hours

Each unit of the products requires the following:

		Soft Steel		Hard Steel
Direct materials costs		$300		$200
Direct labour costs		$120		$60
Purchase orders		2		3
Machine set-up		5		10
Product testing		3		4
Machining		100		100
Material handling		4		6

(a)

Under traditional product costing using machine hours, calculate the total manufacturing cost per unit of both products. (Round predetermined overhead rate to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 1525.)

		Soft Steel		Hard Steel
Total manufacturing cost per unit		$enter a dollar amount		$enter a dollar amount

(b)

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(c)

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Answer rating: 100% (QA)

a To calculate the total manufacturing cost per unit using traditional product costing we need to allocate the overhead costs based on machine hours First lets calculate the predetermined overhead rat... View the full answer