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![]() ![]() After analyzing the indirect-cost pool for Decorative Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Information related to Decorative Doors production for the most recent year follows: Interior 3,200 $ 125 $ 30 $ 16 1.50 40 72 45 5,500 250 Exterior 1,800 $ 200 $ 45 S 16 2.25 Units sold Selling price Direct material cost per unit Direct manufacturing labor cost per hour Direct manufacturing labor-hours per unit Production runs Material moves Machine setups Machine-hours Number of inspections 85 168 155 4,500 150 The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. ![]() The simple costing system allocates indirect costs on the basis of machine- hours. The company's simple costing system has two direct-cost categories (materials and labor) and one st pool. produces two types of doors, inte- or and exterior. 26 Activity-based costing, manufacturing.
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