Problem 5-49 Activity-Based Costing; Product Promotion (LO 5-1, 5-2, 5-4, 5-5) 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. Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Type A Type B 24,000 45,000 S 28 33 S 42 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 200 150 350 shipments 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. 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.
Problem 5-49 Activity-Based Costing; Product Promotion (LO 5-1, 5-2, 5-4, 5-5) 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. Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Type A Type B 24,000 45,000 S 28 33 S 42 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 200 150 350 shipments 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. 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.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 39E: Step Costs, Relevant Range Bellati Inc. produces large industrial machinery. Bellati has a machining...
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Transcribed Image Text:Problem 5-49 Activity-Based Costing; Product Promotion (LO 5-1, 5-2, 5-4, 5-5)
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.
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Type
A
Type B
24,000
45,000
S
28
33
S
42
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
200
150
350
shipments
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.
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.
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