P4-40A Use ABC to compute full product costs (Learning Objective 2) Prescott Cor
ID: 2499406 • Letter: P
Question
P4-40A Use ABC to compute full product costs (Learning Objective 2)
Prescott Corp. manufactures computer desks in its Seville, Ohio, plant. The company uses activity-based costing to allocate all manufacturing conversion costs (direct labor and manufacturing overhead). Its activities and related data follow:
Prescott produced two styles of desks in March: the Standard desk and the Unpainted desk. Data for each follow:
Requirements
1.Compute the per-unit manufacturing product cost of Standard desks and Unpa inted desks.
2.Premanufacturing activities, such as product design, were assigned to the Standard desks at $4 each and to the Unpainted desks at $3 each. Similar analyses were conducted of post-manufacturing activities, such as distribution, marketing, and customer service.The post-manufacturing costs were $23 per Standard and $22 per Unpainted desk. Compute the full product costs per desk.
3.Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
4.What price should Prescott's managers set for Standard desks to earn a $41 profit per desk?
Activity Budgeted Cost of Activity Allocation Base Cost Allocation Rate Materials handling $330,000 Number of parts $0.70 Assembling $2,600,000 Direct labor hours $16.00 Painting $150,000 Number of painted desks $5.10Explanation / Answer
Answer:1
Answer:2
Answer:3 Manufacturing product costs are reported in the financial statements.
Managers use full product costs for decisions, such as pricing and product emphasis.
Full product costs are reported in the costs of premanufacturing activities and postmanufacturing activities that are expensed as incurred for external reporting. However, these costs often are assigned to products for internal decisions.
Answer:4
Prescott Corp. Per-Unit Manufacturing Costs Particulars Standard desk Unpainted Desk Direct materials 99000 18000 Materials handling (118,500 x $0.70); (28,500 x $0.70) 82950 19950 Assembling (5,700 x $16.00); (1,000 x $16.00) 91200 16000 Painting (5,500 x $5.10); (0) 28050 0 Total manufacturing costs 301200 53950 Number of units 5500 3000 Manufacturing product cost per unit (rounded) $55 $18Related Questions
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