The Riverdale Printing Company prints limited edition art books with

The Riverdale Printing Company prints limited edition art books with production runs of 15,000 to 100,000. It has recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to one product, Art of Design, and the ABC cost pools:
Art of Design:
Annual production .......................40,000 units
Direct materials per unit ..........................$37
Direct labor per unit ................................$8
Manufacturing overhead cost pools:
Cost Pool Cost Driver Number of purchase orders Number of receiving reports Number of setups Number of inspections Direc

Annual activity information related to cost drivers:

Cost Pool All Books Art of Design Materials ordering Materials inspection Equipment setup Quality control 120,000 orders

a. Calculate the overhead rate per unit of activity for each of the five cost pools.
b. Calculate the total overhead assigned to the production of the Art of Design. Round to two decimal places.
c. Calculate the overhead cost per unit for the Art of Design.
d. Calculate the total unit cost for the Art of Design.
e. Suppose that Riverdale Printing allocates overhead by a traditional production volume-based method using direct labor dollars as the allocation base and one cost pool. Determine the overhead rate per direct labor dollar and the per unit overhead assigned to the Art of Design. Discuss the difference in cost allocations between the traditional method and the activity-based costing approach.


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