Great Furniture Inc. (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets he production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and abour costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour ho s the allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the ystem by applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter. Activity Cost Pool Parts receipts Machining Assembly Quality control Direct materials Direct labour Activity Base Number of parts Machine hours. Units produced Units tested Activity Rate $6.00 per part $18.00 per machine-hour $ 5.00 per unit $ 3.00 per unit Desks $4,806 $8,090 Activity Usage 506 parts 306 machine hours 506 units 106 units Ca 1,012 par 506 ma 400 un 206 un $8,700 $8,300 ach product consumed 506 direct labour hours. equired: 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.)
Great Furniture Inc. (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets he production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and abour costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour ho s the allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the ystem by applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter. Activity Cost Pool Parts receipts Machining Assembly Quality control Direct materials Direct labour Activity Base Number of parts Machine hours. Units produced Units tested Activity Rate $6.00 per part $18.00 per machine-hour $ 5.00 per unit $ 3.00 per unit Desks $4,806 $8,090 Activity Usage 506 parts 306 machine hours 506 units 106 units Ca 1,012 par 506 ma 400 un 206 un $8,700 $8,300 ach product consumed 506 direct labour hours. equired: 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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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Great Furniture Inc. (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 Cost Pool
Parts receipts
Machining
Assembly
Quality control
Direct materials
Direct labour
Each product consumed 506 direct labour hours.
Activity Base
Number of parts
Machine hours
Units produced
Units tested
Total manufacturing cost
Cost per unit
Total manufacturing cost
Cost per unit
Desks
Cabinets
Desks
Activity Rate
$ 6.00 per part
$18.00 per machine-hour
$ 5.00 per unit
$ 3.00 per unit.
Cabinets
Desks
$4,806
$8,090
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.)
Activity Usage
506 parts
306 machine hours.
506 units
106 units
2. Redo the above using direct labour hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.)
Cabinets
1,012 parts
506 machine hours
400 units
206 units
$8,700
$8,300
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