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Activity based costing vs traditional overhead allocation

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Solution Summary

Provides a comparison between activity based costing and traditional overhead allocation.

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Using activity based accounting we have the cost of Direct Materials $107,200/- add direct labor $196,800 add materials handling cost 70,400 x 0.20 = 14,080 add cutting and lathe work 70,400 x 1.40 = 98,560 and Assembly and inspection cost 70,400 x 20.00 = 1408,000 giving us a grand total of $1647,640/3200 = $514.89 which is the cost per unit.

Taking direct labor hour's basis. As the total number of hours per year is ...

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