Please include all details on this sheet.

Formulas must be used.

Wilkins Corporation manufactures two types of handbagsStandard and Customand applies manufacturing overhead to all units using machine hours.

Production information follows.

Standard Custom Anticipated volume (units) 58,500 31,200

Direct-material cost per unit $ 46 $ 69

Direct-labor cost per unit 51 60

The controller, who is studying the use of activity-based costing, has determined that the firms overhead can be identified with three activities: manufacturing setups, machine processing, and purchase orders.

Data on the number of setups, machine hours, and purchase orders, which are the activities three respective cost drivers, follow.

Standard Custom Setups 176 136

Machine hours 62,400 87,750

Purchase orders 200 150

The firms total overhead is: $23,423,400 It is subdivided as follows:

manufacturing setups $5,110,560

machine processing $14,054,040

purchase orders $4,258,800

Required:

1. Compute the per unit total manufacturing cost of Standard and Custom handbags by using the companys current overhead costing procedures with machine hours.

2. Compute the per unit total manufacturing cost of Standard and Custom handbags by using activity-based costing.

3. Assume that the current selling price of a Standard handbag is $330.00 and the marketing manager is contemplating a $60 discount to stimulate volume. Is this discount advisable? Show calculations to support your answer.

4. Which method should the company use and why?