Asian Tools, a Manufacturer of Precision Hand Tools, Is Concerned

Essay

Asian Tools, a manufacturer of precision hand tools, is concerned with the apparent lack of controls over cost incurrence in its Hand Tool Division. The division has always used a plant-wide rate for allocating manufacturing overhead to its products. However, some products cost substantially more than competitors' retail prices while others are substantially less. The division manager believes that a better cost allocation method can be developed.
With the assistance of a plant supervisor, the accounting department has been able to establish the following relationships between production activities and the indirect costs of the activities:
The traditional allocation method is based upon direct manufacturing labour hours, and if that method is used the rate is $28 per hour.
Required:
Compute the unit indirect manufacturing costs of a batch of 200 tools if the batch required 220 parts, 8 machine hours, 52 minutes of finishing time, and 46 direct labour hours: