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. Descriptions Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Type A 8,000 $ 35 Type B 15,000 20 $ 60 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. Descriptions Setups Machine hours Outgoing shipments Type A Type B Total 50 16,000 100 30 22,500 75 80 38,500 175 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. Required: 1. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures. 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing.

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. Descriptions Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Type A 8,000 $ 35 Type B 15,000 20 $ 60 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. Descriptions Setups Machine hours Outgoing shipments Type A Type B Total 50 16,000 100 30 22,500 75 80 38,500 175 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. Required: 1. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures. 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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