Chapter 19, Problem 35AP

Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar’s activity areas and related data follow:

^*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory

Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:

Requirements

1. 1. Compute the manufacturing product cost per unit of each type of bookcase.
2. 2. Suppose that pre-manufacturing activities, such as product design, were assigned to the standard bookcases at $5 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $20 per standard bookcase and $18 per unfinished bookcase. Compute the full product costs per unit.
3. 3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
4. 4. What price should Oscar’s managers set for unfinished bookcases to earn a net profit of $19 per bookcase?