Byte Computer Company, a manufacturing organization, has just completed an order that Grater, Ltd., placed for 80 computers. Byte recently shifted from a traditional system of allocating costs to an activity-based costing system. Simone Faure, Byte’s controller, wants to know the impact that the ABC system had on the Grater order. Direct materials, purchased parts, and direct labor costs for the Grater order are as follows:

Other operating costs are as follows:
Traditional costing data:
Overhead costs were applied at a single, plantwide overhead rate of 270 percent of direct labor dollars.
Activity-based costing data:

Required
1. Using the traditional costing method, compute the total cost of the Grater order.
2. Using the activity-based costing method, compute the total cost of the Grater order.
3. Manager Insight: What difference in the amount of cost assigned to the Grater order resulted from the shift to activity-based costing? Was Byte’s shift to activity-based costing a good managementdecision?

Transcribed Image Text:

Cost of direct materials Cost of purchased parts $36,750.00 $21,300.00 Direct labor hours Average direct labor pay rate 220 $15.25 Activity Usage for Grater Order Activity Cost Driver Activity Cost Rate Electrical engineering design Setup Parts production Product testing Packaging Building occupancy Engineering hours Number of setups Machine hours Product testing hours Packaging hours Machine hours $19.50 per engineering hour $29.40 per setup $26.30 per machine hour $32.80 per product testing hour $17.50 per packaging hour $9.80 per machine hour 32 engineering hours I setups 134 machine hours 52 product testing hours 22 packaging hours 134 machine hours