Exercise 8-5 (30 minutes)
The first step is to compute the overhead cost for each of the products ordered by the customer:
Standard Model
Activity Cost Pool Activity Rate Activity ABC Cost
Manufacturing volume ... $26 per direct labor-hour 527 direct labor-hours $13,702
Order processing... $284 per order 1 order $284
Custom design processing... $186 per custom design 0 custom designs $0
Customer service ... $379 per customer Not applicable
Custom Design
Manufacturing volume ... $26 per direct labor-hour 84 direct labor-hours $2,184
Order processing... $284 per order 3 order $852
Custom design processing... $186 per custom design 3 custom designs $558
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