Cairns Company has identified the following overhead activities, costs, and activity drivers for the coming year:

The company produces several different machine subassemblies used by other manufacturers. Information on separate batches for two of these subassemblies follows:

The company's normal activity is 4,000 direct labour hours. Each batch uses 50 hours of direct labour.
Required:
1. Upon investigation, you discover that the receiving department employs one worker, who spends half her time on the receiving activity and half her time on inspecting products. Her salary is $40,000. Receiving also uses a forklift, at a cost of $5,000 per year for amortization and fuel. The forklift is used only in receiving.
a. Verify the cost of the receiving activity given above.
b. What resource driver was used?
2. Determine the unit cost for each product using direct labour hours to apply overhead.
3. Determine the unit cost for each product using the four activity drivers.

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Activity Driver Number of setups Inspection hours Machine hours Number of parts Expected Cost ($) 60,000 45,000 Activity Capacity 300 4,500 18,000 Activity Setting up Inspecting Grinding Receiving 90,000 25 50,000 Direct materials S850 $600 $950 Direct labour $600 Units completed Number of setups Inspection hours Machine hours 100 50 1 1 4 20 30 Parts used 20 40