Miller Manufacturing (2M) makes a variety of components for mechanized agricultural equipment. The products are similar but not identical, and all go through many of the same processes. 2M sells products worldwide and has to comply with various regulations regarding environmental and health and safety compliance. For the most part, 2M manufacturing practices comply with or exceed requirements in the countries to which it ships its products, but depending on the specific part ordered, it might have to go through additional certification processes to make the sale. The company produces to order and never has any work-in-process inventories. The manufacturing facility uses a job costing system for product costing. Manufacturing overhead is applied to jobs based on direct labor cost. The cost analyst at 2M recently put together an estimate of overhead for the coming year, which is shown in the following table: Category Amount Fabricating $ 480,000 Machining 960,000 Machine setup 768,000 Shipping 432,000 Certification 240,000 Total $ 2,880,000 The following are estimates for the three jobs planned for March: Job MM03-11 Job MM03-12 Job MM03-13 Direct materials $ 9,600 $ 14,400 $ 12,000 Direct labor $ 24,000 $ 38,400 $ 31,200 Number of units 300 750 600 Direct labor hours 360 1,200 540 Machine-hours 750 1,050 900 Setup-hours 15 30 15 Certification required? Yes Yes No 2M is considering adopting an activity-based costing system. The cost analyst has studied the system and has recommended the following cost drivers for each of the overhead categories. The analyst has also estimated the annual volume for each of the cost drivers. This information follows. Overhead Category Cost Driver Annual Cost Driver Volume Fabricating Direct labor-hour 24,000 direct labor-hours Machining Machine-hours 30,000 machine-hours Machine setup Setups-hours 1,200 setup-hours Shipping Units 180,000 units Certification Certifications required 20 certifications required The average direct labor rate at 2M is $40 per hour. What is the unit cost for each of the three jobs started and completed assuming 2M uses its current costing system? Note: Round your answers to 2 decimal places. What is the unit cost for each of the three jobs started and completed assuming 2M adopts the ABC system as designed by the cost analyst? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Unit CostJob MM03-11Job MM03-12Job MM03-13 a. Using the current costing system $352.00 $224.00 $228.00 b. Using the ABC system How to figure out B?
Miller Manufacturing (2M) makes a variety of components for mechanized agricultural equipment. The products are similar but not identical, and all go through many of the same processes. 2M sells products worldwide and has to comply with various regulations regarding environmental and health and safety compliance. For the most part, 2M manufacturing practices comply with or exceed requirements in the countries to which it ships its products, but depending on the specific part ordered, it might have to go through additional certification processes to make the sale.
The company produces to order and never has any work-in-process inventories. The manufacturing facility uses a
| Category | Amount |
|---|---|
| Fabricating | $ 480,000 |
| Machining | 960,000 |
| Machine setup | 768,000 |
| Shipping | 432,000 |
| Certification | 240,000 |
| Total | $ 2,880,000 |
The following are estimates for the three jobs planned for March:
| Job MM03-11 | Job MM03-12 | Job MM03-13 | |
|---|---|---|---|
| Direct materials | $ 9,600 | $ 14,400 | $ 12,000 |
| Direct labor | $ 24,000 | $ 38,400 | $ 31,200 |
| Number of units | 300 | 750 | 600 |
| Direct labor hours | 360 | 1,200 | 540 |
| Machine-hours | 750 | 1,050 | 900 |
| Setup-hours | 15 | 30 | 15 |
| Certification required? | Yes | Yes | No |
2M is considering adopting an activity-based costing system. The cost analyst has studied the system and has recommended the following cost drivers for each of the overhead categories. The analyst has also estimated the annual volume for each of the cost drivers. This information follows.
| Overhead Category | Cost Driver | Annual Cost Driver Volume | |
|---|---|---|---|
| Fabricating | Direct labor-hour | 24,000 | direct labor-hours |
| Machining | Machine-hours | 30,000 | machine-hours |
| Machine setup | Setups-hours | 1,200 | setup-hours |
| Shipping | Units | 180,000 | units |
| Certification | Certifications required | 20 | certifications required |
The average direct labor rate at 2M is $40 per hour.
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What is the unit cost for each of the three jobs started and completed assuming 2M uses its current costing system?
Note: Round your answers to 2 decimal places.
-
What is the unit cost for each of the three jobs started and completed assuming 2M adopts the ABC system as designed by the cost analyst?
Note: Do not round intermediate calculations. Round your final answers to 2 decimal places.
Unit CostJob MM03-11Job MM03-12Job MM03-13
a. Using the current costing system $352.00 $224.00 $228.00
b. Using the ABC system
How to figure out B?
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