Leon Inc. produces and sells three different models of stylish men’s coats-Low, Moderate, and High. The company current

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Leon Inc. produces and sells three different models of stylish
men’s coats-Low, Moderate, and High. The company currently
uses a traditional absorption costing system to allocate
manufacturing overhead costs to product lines. This
traditional costing system allocates manufacturing overhead cost on
the basis of each product’s direct labor costs in dollars.
But the company’s CEO, Leon, recently attended a conference on
Activity Based Costing (ABC), and he’s considering ABC
implementation.
Leon collected the following product data for the year just
ended:
Low
Moderate
High
Units produced and sold
25,000
10,000
5,000
Direct labor hours used in production
5,000
3,500
2,000
Direct labor cost used in production
$90,000
$63,000
$36,000
Machine Hours used
7,500
6,000
8,500
Number of kilowatt hours used by factory during production
7,500
4,000
3,500
Number of production setups
4
5
7
Number of Employees
7
3
6
The company’s CFO computed actual manufacturing overhead costs
for the year just ended as:
Activity
Activity Costs
Machining
$140,000
Utilities
$270,000
Setups
$180,000
Supervision
$480,000
Total Manufacturing Overhead
Cost
$1,070,000
The direct materials cost for the year just ended for units of
Low was $12 per unit, for units of Moderate was $14 per unit, and
for units of High was $21 per unit.
Required: