Reference no: EM131132651

After reading an article about activity-based costing in a trade journal for the furniture industry, Adriana Lopez wondered if it was time to critically analyze overhead costs at Success Systems. In a recent month, Lopez found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 6.15.

Direct materials . . . . . . . . $2,500
Direct labor . . . . . . . . . . . $3,500
Batches . . . . . . . . . . . . . . 2 batches
Number of parts . . . . . . . 400 parts
Machine hours . . . . . . . . . 600 machine hours

Required

1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.
2. What is the total cost of Job 6.15 if Success Systems applies overhead at 50% of direct labor cost?
3. What is the total cost of Job 6.15 if Success Systems uses activity-based costing?
4. Which approach to assigning overhead gives a better representation of the costs incurred to produce Job 6.15? Explain.