Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based osting to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.)
Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based osting to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Green Furniture (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets. The
production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour
costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the
allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by
applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter.
Activity Usage
Desks
2,100 parts
Activity Cost Pool
Parts receipts
Machining
Assembly
Quality control
Activity Base
Number of parts
Machine-hours
Activity Rate
Cabinets
$ 1.00 per part
$15.00 per machine-hour
$ 1.40 per unit
$ 2.00 per unit
1,450 parts
315 machine-hours
215 machine-hours
Units produced
Units tested
1,450 units
1,350 units
$ 2,900
1,050 units
105 units
$ 5,250
$12,600
Direct materials
Direct labour
$12,600
Each product consumed 630 direct labour-hours.
Required:
1. Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based
costing to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.)
Answer is complete and correct.
Desks
Cabinets
Total manufacturing cost
2$
24,855
$
26,405
Cost per unit
$
23.67 O $
18.21 O
2. Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.)
Answer is complete but not entirely correct.
Desks
Cabinets
Total manufacturing cost
24
26,802 x $
38.300 X
Cost per unit
25.53
16.86 O
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