Woodland Industries manufactures and sells custom-made windows. 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 three manufacturing
overhead cost drivers (activities). Assume that the direct labor rate is $18 per hour and that there were no beginning inventories. The
following information was available for 2016, based on an expected production level of 52,100 units for the year, which will require
226,000 direct labor hours:
Budgeted Costs for
2016
$
38,420
2,583,180
4,294,000 Activity Cost Driver
Materials handling
Cutting and lathe work
Assembly and inspection Cost Driver Used as Allocation
Base
Number of parts used
Number of parts used
Direct labor hours Cost Allocation Rate
$ 0.17 per part
11.43 per part
19.00 per hour The following production, costs, and activities occurred during the month of July:
Units Produced
3,200 Direct Materials
Costs
$102,700 Number of Parts
Used
1,081 Direct Labor
Hours
13,500 Required:
a. Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of July (using the activitybased costing approach). (Round "Cost per unit produced" to 2 decimal places.) Total manufacturing cost
Cost per unit produced b. Assume instead that Woodland Industries applies manufacturing overhead on a direct labor hours basis (rather than using the activitybased costing system previously described). Calculate the total manufacturing cost and the cost per unit of the windows produced during
the month of July. (Hint: You will need to calculate the predetermined overhead application rate using the total budgeted overhead costs
for 2016.) (Round "Cost per unit produced" to 2 decimal places.) Total manufacturing cost
Cost per unit produced c. Which approach do you think provides better information for manufacturing managers?
Activity based costing
Direct labor hours basis References Worksheet Check my work eBook & Resources Difficulty: 2 Medium Learning Objective: 13-09 Perform activity-based costing
and describe activity-based management.

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