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Smith Machining produces specialized equipment. Currently, the company uses a traditional system for allocating manufacturing...

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Accounting

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Smith Machining produces specialized equipment. Currently, the company uses a traditional system for allocating manufacturing overhead. Overhead costs are allocated at a rate of S5 per machine hour and the company used 20,000 machine hours last year. Smith's CEO has heard about Activity Based Costing (ABC), and would like to see if it makes any difference in the costs allocated to jobs at the company. The accounting staff has provided the following information about manufacturing overhead: The company estimates that it will perform 150 setups and 1,000 inspections each year and, as previously stated, will use 20,000 machine hours each year. Job FWS will require 18 setups, 85 machine hours, and 60 inspections. Using ABC, what amount of manufacturing overhead will be allocated to Job FWS? (six points) What is the total cost of the job if Direct Material cost is $200 and Direct Labor is S150? What amount of manufacturing overhead would Smith allocate to job FWS using their current, traditional system? (six points)

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