Question

1. Sonata Corporation makes three types of products—Model Z, Model EF, and Model DS. The manufacturing operations are mechanized and there is no direct labor. Manufacturing overhead costs are significant, and Destiny has adopted an activity-based costing system. Direct materials costs per unit for each model are as follows:

Model Z           $93

Model EF         $88

Model DS        $127

Sonata Corporation has 5 activities—assembly, materials management, testing, inspecting and milling. The cost driver for assembly is machine hours. Total costs and production volumes for the year 2019 were estimated as follows

	Total Indirect cost	Allocation Base	Cost Driver
Assembly	$992,500	240,600	Machine hours
Materials management	$405,600	42,500	Parts
Testing	$190,000	7,000	Units
Inspection	$120,400	4,775	Inspections
Milling	$215,750	220,050	Milling Minutes

The following is the amount each product uses of each driver:

	Model Z	Model EF	Model DS
No. Of Units	1,005	730	885
Assembly	61,305 Machine Hours	45,260 Machine hours	56,640 Machine Hours
Materials management	5,025 parts	2,190 parts	6,195 parts
Testing	402 units	365 units	354 units
Inspection	201 inspections	292 inspections	177 inspections
Milling	31,155 Milling Minutes	25,550 Milling Minutes	25,665 Milling Minutes

1. Calculate the estimated cost of overhead per unit using the ABC method. Complete the 4 step process to allocate indirect costs to each unit. Calculate the estimate total cost per unit. (40 points)
2. Calculate the estimated total cost per unit using the single base allocation method for the same data set using machine hours as the driver. (10 points)
3. Which method is superior? Why? (4 points)

Answer 1