After reading anarticle about activity-based costing in a trade journal for thefurniture industry, Santana Rey wondered if it was time tocritically analyze overhead costs at Business Solutions. In arecent month, Santana found that setup costs, inspection costs, andutility costs made up most of its overhead. Additional informationabout overhead follows.
| Activity | | Cost | | Driver |
| Setting upmachines | $ | 18,040 | | 22 | batches |
| Inspectingcomponents | $ | 5,100 | | 5,100 | parts |
| Providingutilities | $ | 10,200 | | 5,100 | machinehours |
|
Overhead has been applied to output at a rate of 50% of directlabor costs. The following data pertain to Job 615.
| | | |
| Directmaterials | $ | 2,700 | |
| Directlabor | $ | 3,100 | |
| Batches | | 4 | batches |
| Number ofparts | | 570 | parts |
| Machinehours | | 660 | machinehours |
|
Required:
1. Classify each of its three overhead activitiesas unit level, batch level, product level, or facility level.
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| | | | Setting up machines | | | Inspecting components | | | Providing utilities | |
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2. What is the total cost of Job 615 if BusinessSolutions applies overhead at 50% of direct labor cost?
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3. What is the total cost of Job 615 if BusinessSolutions uses activity-based costing?
