Advanced Managerial Accounting Week 2 - Application Assignment (50 Points) CUT IT RITE Corporation produces two types of precision grinders, Standard and Diamond Grade. The standard grinders, used primarily in factory work. Recently, CIR began making a Diamond Grade Grinder for medical work. Company president Susan Witte believes that the accounting system may not be accurately allocating costs to products, particularly since sales of the new Diamond Grade product have been increasing. She asks you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on the direct labor costs in the products. For your investigation, you have data from last year. Last year's manufacturing overhead was $220,000 based on production of 320,000 standard grinders and 100,000 diamond grade grinders. Direct labor and direct materials costs were as follows: Material Direct Labor Standard Diamond Grade Total $150,000 $100,000 $250,000 $125,000 $115,000 $240,000 Overhead Information is as follows: Cost Pools Production Runs Quality Testing Machining Total Overhead The Cost drivers for each pool were evaluated and are as follows Required (50 points) Costs $100,000 $ 90,000 $ 30,000 $220,000 Diamond Standard Grade Total Number of Production Quality Tests Required Machining Time 40 10 12 18 100 50 5550 30 Determine the Total and Unit cost for the precision grinders using both the current method of allocating manufacturing overhead and using Activity Based Costing to allocate Manufacturing Overhead Complete the Table Below. Standard Diamond Grade Total Cost Using Direct Labor Costs to Allocate Manufacturing Overhead Activity Based Costing to Allocate Manufacturing Overhead Unit Costs Direct Labor Costs to Allocate Manufacturing Overhead Activity Based Costing to Allocate Manufacturing Overhead Standard Diamond Grade For Partial Credit, submit your spread sheets as well