All applicable Problems are available with McGraw-Hill’s Connect™Accounting. Activity-based costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. 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 four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $25 per hour and thatthere were no beginning inventories. The following information was available for 2013, based on an expected production level of 100,000 units for the year:Activity Budgeted Cost Driver Used Cost(Cost Driver) Costs for 2013 as Allocation Base Allocation RateMaterials handling $1,200,000 Number of parts used $ 2.00 per partMilling and grinding 2,200,000 Number of machine hours 11.00 per hourAssembly and inspection 1,500,000 Direct labor hours worked 5.00 per hour Testing 300,000 Number of units tested 3.00 per unitThe following production, costs, and activities occurred during the month of August: Units Direct Number Machine DirectProduced/Tested Materials Costs of Parts Used Hours Labor Hours10,000 $900,000 62,000 18,000 35,000Required:a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc.b. Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. (Note: You do not have to calculate the overhead that would be applied for the month of August using this alternative method.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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All applicable Problems are available with McGraw-Hill’s Connect™
Accounting. Activity-based costing MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. 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 four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $25 per hour and thatthere were no beginning inventories. The following information was available for 2013, based on an expected production level of 100,000 units for the year:
Activity Budgeted Cost Driver Used Cost
(Cost Driver) Costs for 2013 as Allocation Base Allocation Rate
Materials handling $1,200,000 Number of parts used $ 2.00 per part
Milling and grinding 2,200,000 Number of machine hours 11.00 per hour
Assembly and inspection 1,500,000 Direct labor hours worked 5.00 per hour Testing 300,000 Number of units tested 3.00 per unit
The following production, costs, and activities occurred during the month of August: Units Direct Number Machine Direct
Produced/Tested Materials Costs of Parts Used Hours Labor Hours
10,000 $900,000 62,000 18,000 35,000
Required:
a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc.
b. Explain the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. (Note: You do not have to calculate the overhead that would be applied for the month of August using this alternative method.)

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