Problem $13\mathrm{.}23$

LO $13-9$

Activity$-$based costing HealthTech Inc. manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity$-$based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers $($activities$).$ Assume that the direct labor rate is $$22$ per hour and that there were no beginning inventories. The following information was available for $2022,$ based on an expected production level of $200,000$ units for the year:

$\backslash$table$[[\backslash$table$[[$Activity$],[$Cost Driver$]],\backslash$table$[[$Budgeted$],[$Costs for $2022]],\backslash$table$[[$Cost Driver Used$],[$as Allocation Base$]],\backslash$table$[[$Cost$],[$Allocation Rate$]]],[\backslash$table$[[$Materials$],[$handling$]],$$$1,800,00,\backslash$table$[[$Number of$],[$parts used$]],$$$3/$part$],[\backslash$table$[[$Milling and$],[$grinding$]],4,400,000,\backslash$table$[[$Number$],[$machine$],[$hours$]],22/$hour$],[\backslash$table$[[$Assembly and$],[$inspection$]],3,000,000,\backslash$table$[[$Direct labor$],[$hours worked$]],10/$hour$],[$Testing$,600,000,\backslash$table$[[$Number of$],[$units tested$]],6/$unit$]]$

The following production, costs, and activities occurred during the month of April:

Page $514$

$\backslash$table$[[\backslash$table$[[$Units$],[$Produced$/$Tested$]],\backslash$table$[[$Direct$],[$Materials Costs$]],\backslash$table$[[$Number$],[$of Parts Used$]],\backslash$table$[[$Machine$],[$Hours$]],\backslash$table$[[$Direct$],[$Labor Hours$]]],[25,000,$$$2,700,000,137,500,47,500,120,000]]$

Required:

a$.$ Calculate the total manufacturing costs and the cost per unit produced and tested during the month of April for HealthTech.

b$.$ Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. $($Note: You do not have to calculate the overhead that would be applied for the month of April using this alternative method.$)$