Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing overhead to all units the rate of $140 per machine hour. Production information follows. Descriptions Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Descriptions The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with th 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. Setups Machine hours Outgoing shipments Type A 160 56,000 200 Type A 28,000 $38 43 Required 1 Required 2 Type B 120 78,750 150 Type B 52,500 $57 43 The firm's total overhead of $18,865,000 is subdivided as follows: manufacturing setups, $4,116,000; machine processing, $11,319, and product shipping, $3,430,000. Required: 1. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures. Required 3 Total 280 134,750 350 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing. 3. 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? 4. Assume that the current selling price of a Type A storage cabinet is $422.00 and the marketing manager is contemplating a $4 discount to stimulate volume. Is this discount advisable? Complete this question by entering your answers in the tabs below. Required 4 Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures.
Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing overhead to all units the rate of $140 per machine hour. Production information follows. Descriptions Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Descriptions The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with th 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. Setups Machine hours Outgoing shipments Type A 160 56,000 200 Type A 28,000 $38 43 Required 1 Required 2 Type B 120 78,750 150 Type B 52,500 $57 43 The firm's total overhead of $18,865,000 is subdivided as follows: manufacturing setups, $4,116,000; machine processing, $11,319, and product shipping, $3,430,000. Required: 1. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures. Required 3 Total 280 134,750 350 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing. 3. 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? 4. Assume that the current selling price of a Type A storage cabinet is $422.00 and the marketing manager is contemplating a $4 discount to stimulate volume. Is this discount advisable? Complete this question by entering your answers in the tabs below. Required 4 Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Maxey & Sons manufactures two types of storage cabinets-Type A and Type B—and applies manufacturing overhead to all units at
the rate of $140 per machine hour. Production information follows.
Descriptions
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Descriptions
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.
Setups
Machine hours
Outgoing shipments
Туре А
160
56,000
200
Туре А
28,000
$38
43
Required 1 Required 2 Required 3
Туре В
Unit manufacturing costs
120
78,750
150
The firm's total overhead of $18,865,000 is subdivided as follows: manufacturing setups, $4,116,000; machine processing, $11,319,000
and product shipping, $3,430,000.
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.
3. 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?
4. Assume that the current selling price of a Type A storage cabinet is $422.00 and the marketing manager is contemplating a $45
discount to stimulate volume. Is this discount advisable?
Туре А
Туре В
52,500
$57
43
Complete this question by entering your answers in the tabs below.
Total
280
134,750
350
Required 4
Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing
procedures.
Type B
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