Given:

maxey & sons manufactures two types of storage cabinets—type a and type b—and applies manufacturing overhead to all units at the rate of $80 per machine hour. production information follows.

type a type b
anticipated volume (units) 8,000 15,000
direct-material cost per unit $ 35 $ 60
direct-labor cost per unit 20 20

the controller, who is studying the use of activity-based costing, has determined that the firm’s overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. data on the number of setups, machine hours, and outgoing shipments, which are the activities’ three respective cost drivers, follow.

type a type b total
setups 50 30 80
machine hours 16,000 22,500 38,500
outgoing shipments 100 75 175

the firm’s total overhead of $3,080,000 is subdivided as follows: manufacturing setups, $672,000; machine processing, $1,848,000; and product shipping, $560,000.

how do i find:

a) compute the unit manufacturing cost of type a and type b storage cabinets by using activity-based costing

b) is the cost of the type a storage cabinet overstated or understated (i. e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? by how much?