Woodside Manufacturing produces three types of knives: Modern,Classic and Fancy. The following information is available for each product.

Modern Classic Fancy

Direct material costper unit $2.00 $8.00 $10.00

Direct labor cost perhour $15.00 $16.75 $18.00

Woodside Manufacturing presently applies overhead using a predetermined rate based on direct labor hours.Estimated Direct Labor hours for the year are132,026.

The product leader for Modern has suggested that Woodside Manufacturing switch to activity-based costing and identified the following activities,cost drivers,estimated costs,and estimated cost driver units for the year:

Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Units

Ordering Costs Purchase Orders $33,912 1256 Purchase Orders

Machine Operations Machine Hours $1,425,000 12500 Hours

Quality Control Inspections $125,400 110 Inspections

Total Overhead Costs: $1,584, 312

Actual December Production

Modern Classic Fancy

Number of Units Produced 5,875 7,200 5,800

Direct Labor Hours 3,150 4,100 4,250

Machine Hours 375 206 442

Inspections 2 3 5

Purchase Orders 14 19 15

1.) What is the December total manufacturing cost for Classic when OH is allocated on the plantwide rate based on DL hours?

2.) What is the December total manufacturing cost for Classic when ABC is used to allocate OH.

I'm not even sure where to begin on this practice problem. I'm having trouble knowing what to do. This information is all new to me. I was wondering if anyone could help me answer this question. Thanks for your help.

Answer rating: 100% (QA)

To solve this problem we need to follow these steps 1 Calculate the predetermined overhead rate base... View the full answer