Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead to all units at the rate of $120 per machine hour. Production information follows. Type A Type B Anticipated volume (units) 24,000 45,000 Direct-material cost per unit $ 28 $ 42 Direct-labor cost per unit 33 33 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.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing
Type A Type B
Anticipated volume (units) 24,000 45,000
Direct-material cost per unit $ 28 $ 42
Direct-labor cost per unit 33 33
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 Type B Total
Setups 140 100 240
Machine hours 48,000 67,500 115,500
Outgoing shipments 200 150 350
The firm’s total overhead of $13,860,000 is subdivided as follows: manufacturing setups, $3,024,000; machine processing, $8,316,000; and product shipping, $2,520,000. the unit
what is the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing?
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