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Calculate the cost of a custom cello using activity-based costing.

Manufacturing Standard Custom
Overhead Cost Amount       Cost Driver Cello Cello
Building depreciation $40,000       Square footage 3,000 1,000
Maintenance $15,000       Direct labor hours 9,000 1,000
Purchasing $20,000       # of purchase orders 1,500 500
Inspection $12,000       # of inspections 400 600
Indirect materials $15,000       # of units manufactured 900 100
Supervision $30,000       # of inspections 400 600
Supplies $3,000       # of units manufactured 900 100
Total $135,000  

 

 

 

 

 

 

4.      Calculate the cost of a custom cello using activity-based costing. 
5.       Why is the cost different from the cost calculated using the traditional allocation method? 
6.      At the current selling price, is the company covering its true cost of production? Briefly discuss 

 

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