Drilling Company uses activity-based costing and provides this information: Manufacturing Activity Cost Driver Driver Rate Materials handling Number of parts $ 0.4 Machinery Number of machine hours 61 Assembly Number of parts 3.35 Inspection Number of finished units 40

Drilling has just completed 90 units of a component for a customer. Each unit required 110 parts and 3.50 machine hours. The prime cost is $1,400 per finished unit. All other manufacturing costs are classified as manufacturing overhead.


1. Compute the total manufacturing costs and the unit costs of the 90 units just completed using ABC costing.

2. In addition to the manufacturing costs, the firm has determined that the total cost of upstream activities, including research and development and product design, is $190 per unit. The total cost of downstream activities, such as distribution, marketing, and customer service, is $310 per unit. Compute the full product cost per unit, including upstream, manufacturing, and downstream activities. Also compute the relative proportion of each main cost category.

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