Drilling has just completed 70 units of a component for a customer. Each unit required 90 parts and 2.50 machine hours. The prime cost is $1,200 per finished unit. All other manufacturing costs are classified as manufacturing overhead.

 

Manufacturing Activity	Cost Driver	Driver Rate
Materials handling	Number of parts	$ 0.70
Machinery	Number of machine hours	41.00
Assembly	Number of parts	2.35
Inspection	Number of finished units	20.00

Required:

1. Compute the total manufacturing costs and the unit costs of the 70 units just completed using ABC costing.

2. In addition to the manufacturing costs, the firm has determined that the total cost of upstream activities, including research and development and product design, is $170 per unit. The total cost of downstream activities, such as distribution, marketing, and customer service, is $290 per unit. Compute the full product cost per unit, including upstream, manufacturing, and downstream activities. Also compute the relative proportion of each main cost category.

Answer rating: 100% (QA)

To compute the total manufacturing costs and the unit costs of the 70 units using ABC costing we need to calculate the costs for each manufacturing ac... View the full answer