A manufacturer manufactures two types of engineering diagnostic equipment used in construction. The two
products are based on different technologies, x-ray and ultrasound, but are manufactured in the same factory. The
manufacturer has computed the manufacturing cost of the x-ray and ultrasound products by adding together
direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory
has three overhead departments that support the single production line that makes both products. Budgeted
overhead spending for the departments is as follows:
Department
Engineering
Material Handling
Setup
Total
7,500
6,000
3,500
17,000
Budgeted manufacturing activities and costs for the period are as follows:
Activity
X-Ray
Ultrasound
Units produced and sold
80
130
Direct materials used
$6,000
$10,000
Direct labor hours used
105
360
Direct labor cost
$4,000
$13,000
Number of parts used
100
600
Number of engineering changes
3
2
Number of product setups
9
The budgeted cost to manufacture one ultrasound machine using the activity-based costing method