Luxury Furniture designs and builds factory-made, premium, woodarmoires for homes. All are of white oak. Its budgetedmanufacturing overhead costs for the year 2017 are as follows.

Overhead Cost Pools Amont ($)

Purchasing 48,000

Handling materials 50,000

Production (cutting, milling, finishing) 137,000

Setting up machines 85,000
Inspecting 60,000
Inventory control (RM and FG) 85,000

Utilities 100,000

For the last 4 years, Luxury Furniture has been chargingoverhead to products on the basis of materials cost. For the year2017, materials cost of $580,000 were budgeted. Jim Brigham,owner-manager of Luxury Furniture, recently directed hisaccountant, Bob Borke, to implement the activity-based costingsystem that he has repeatedly proposed. At Jim Brigham’s request,Bob and the production foreman identify the following cost driversand their usage for the previously budgeted overhead costpools.

Overhead Cost Pools   Activity Cost DriversExpected Use of Cost Drivers

Purchasing Number of orders 500   
Handling materials Number of moves 5,800
Production (cutting, milling, finishing)   Direct laborhours 65,000
Setting up machines   Number of setups 1,700
Inspecting   Number of inspections  4,100
Inventory control (RM and FG)   Number of components  40,000

Utilities Square feet occupied 55,000

Debbie Steiner, sales manager, has received an order for 17luxury armoires from Thom’s Interior Design. At Debbie’s request,Bob prepares cost estimates for producing 17 armoires so Debbie cansubmit a contract price per armoire to Thom’s. He accumulates thefollowing data for the production of 17 armoires.

DM Cost ($) 5,100
DL Cost ($) 3,500
DL Hours 200

Number of Purchase Orders 3

Number of Materials Moves 32

Number of Machine Setups    4

Number of Inspections 20

Number of Components 640

Number of Square Feet Occupied 320

a) What is the unit manufacturing cost per armoire undertraditional costing?
b) What is the unit manufacturing cost per armoire under theproposed activity-based costing?