Activity-Based Costing and Conventional Costs Compared Chef Grill Company manufa

Question

Activity-Based Costing and Conventional Costs Compared
Chef Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoal Smoker. The Cooker is a premium product sold in upscale outdoor shops; the Smoker is sold in major discount stores. Following is information pertaining to the manufacturing costs for the current month.

Manufacturing overhead follows:

Rounding instructions: Do not round until your final answers. Round total cost answers to the nearest dollar and per unit answers to the nearest cent.

(a) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming all manufacturing overhead is assigned on the basis of direct labor dollars.

HINT: Use 7.3809 for overhead rate calculations.

(b) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming manufacturing overhead is assigned using activity-based costing.

Gas Cooker Charcoal Smoker Units 1,000 4,000 Number of batches 60 10 Number of batch moves 80 20 Direct materials $20,000 $100,000 Direct labor $20,000 $27,000

Explanation / Answer

a) Calculation of total and per unit cost on the basis of direct labour dollars: Gas cooker= 346900*20000/47000=$147617.02 Per unit cost of gas cooker= 147617.02/1000=$147.62 charcoal smoker= 346900*27000/47000=$199282.98 Per unit cost of charcoal smoker= 199282.98/4000=$49.82 (b)Calculation of activity rate Activity cost pools Estimated overhead(a) Estimated cost driver(b) activity rates((a)/(b)) Materials acquisition and inspection 2,88,000 120000 2.40 Materials movement 16,900 100 batch moves 169.00 Scheduling 42,000 70 batches 600.00 Gas cooker Charcoal Smoker Activity cost pools Expected use of cost drivers per product(a) activity Based overhead rates(b) cost assigned(a*b)(in$) Expected use of cost drivers per product(c) activity Based overhead rates(d) cost assigned(c*d)(in$) Materials acquisition and inspection 20000 2.40 48000 100000 2.40 240000 Materials movement 80 batch moves 169.00 13520 20 batch moves 169.00 3380 Scheduling 60 batches 600.00 36000 10 batches 600.00 6000 Total overhead cost 97520 249380 Units 1000 4000 Total overhead cost per unit (Total overhead cost/ units) 97.52 62.35

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