M-Y Company manufactures two products, Standard and Deluxe. M-Y's manufacturing overhead costs consist of setting up machines, $400,000; machining, $1,500,000; inspecting, $450,000; material handling $750,000; and purchasing orders $150,000. Information on the two products is:
.......................................Standard............. Deluxe
Direct labour hours ....................150,000.......... 250,000
Machine setups ..............................300...............200
Machine hours ............................48,000........... 52,000
Inspections ....................................800............. 700
Material handling ..........................5,000.......... 10,000
Purchasing orders ............................300.............. 200
Instructions
(a) Assign the total manufacturing overhead costs to the two products using traditional costing.
(b) Assign the total manufacturing overhead costs to the two products using activity-based costing (ABC).