Windows R Us manufactures two product ranges: the standard range and the special range. During July, 300 standard windows and 50 specialised windows were manufactured and indirect production costs of $73 000 were incurred. An analysis of indirect costs reveals the following activities:

The cost driver volume for each product was as follows:

Required:
a. Calculate the indirect activity cost rate for each activity.
b. Allocate the indirect manufacturing overhead costs for July to the products using the activity costrates calculated in a.
c. Write a memo to the managing director of Windows R Us explaining the benefits of activity-basedcosting.

Activity Materials handling Machine set-ups Quality inspections Total Cost driver Number of requisitions Number of set-ups Number of inspections Total Cost $25 000 27 000 21 000 S73 000 Cost driver Number of requisitions Number of set-ups Number of inspections Specialised Standard Total 1000 450 600 400 600 300 400 150 ea 200