Envision Company Uses Activity-Based Costing (ABC)for Allocating Manufacturing Overhead Costs

Essay

Envision Company uses activity-based costing (ABC)for allocating manufacturing overhead costs to jobs and it has established the following cost drivers and rates:
$\begin{array}{lll}\text { Activity}&\text { Cost Driver}&\text { Rate}\\\text { Material handling } & \text { Number of parts used } & \$ 8.00 \text { per part } \\\text { Machine setups } & \text { Number of production runs } & \$ 3,000 \text { per run } \\\text { Assembly and inspection } & \text { Number of direct labor hours } & \$ 20.00 \text { per DLH } \\\text { Quality control } & \text { Number of units inspected } & \$ 5.00 \text { per unit }\end{array}$

During July, Job #2005 produced 1,500 units and required the following activity: 1,800 parts, 2 production runs, and 325 direct labor hours.
(a.)Calculate the amount of manufacturing overhead applied to Job #2005.
(b.)Explain the advantage of using the ABC approach.