Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing overhead to all units at the rate of $160 per machine hour. Production information follows. Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Setups Machine hours Outgoing shipments Type A 180 64,000 200 Type A 32,000 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. Required 1 Required 2 $ Unit manufacturing costs 48 53 Required 3 Type B 140 90,000 150 The firm's total overhead of $24,640,000 is subdivided as follows: manufacturing setups, $5,376,000; machine processing, $14,784,000; and product shipping, $4,480,000. Type A 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 $485.00 and the marketing manager is contemplating a $50 discount to stimulate volume. Is this discount advisable? Type B 60,000 $ Complete this question by entering your answers in the tabs below. Required 4 320 X $ 72 53 Total 320 154,000 350 X Answer is not complete. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhea procedures. Type B Required 1 240 X Required 2 >
Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing overhead to all units at the rate of $160 per machine hour. Production information follows. Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Setups Machine hours Outgoing shipments Type A 180 64,000 200 Type A 32,000 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. Required 1 Required 2 $ Unit manufacturing costs 48 53 Required 3 Type B 140 90,000 150 The firm's total overhead of $24,640,000 is subdivided as follows: manufacturing setups, $5,376,000; machine processing, $14,784,000; and product shipping, $4,480,000. Type A 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 $485.00 and the marketing manager is contemplating a $50 discount to stimulate volume. Is this discount advisable? Type B 60,000 $ Complete this question by entering your answers in the tabs below. Required 4 320 X $ 72 53 Total 320 154,000 350 X Answer is not complete. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhea procedures. Type B Required 1 240 X Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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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 $160 per machine hour. Production information follows.
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Setups
Machine hours
Outgoing shipments
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.
Type A
180
64,000
200
Required 1 Required 2
Type A
32,000
Unit manufacturing costs
$
Required 3
$
The firm's total overhead of $24,640,000 is subdivided as follows: manufacturing setups, $5,376,000; machine
processing, $14,784,000; and product shipping, $4,480,000.
48 $
53
Type B
140
90,000
150
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 $485.00 and the marketing manager is
contemplating a $50 discount to stimulate volume. Is this discount advisable?
Type A
Complete this question by entering your answers in the tabs below.
Type B
60,000
Required 4
320 X $
72
53
Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhea
procedures.
Total
320
154,000
350
Answer is not complete.
Type B
< Required 1
240 X
Required 2 >
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