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 8.9585 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 3,000 Number of batches 50 10 Number of batch moves 80 20 Direct materials $50,000 $100,000 Direct labor $20,000 $21,000

Explanation / Answer

a) overhead rate 367,300/41000 8.9585 Gas Charcoal cooker Smoker direct materials 50,000 100,000 direct labor 20,000 21,000 overhead assinged Gas (20000*8.9585) 179171 charcoal (21000*8.9585) 188129 total cost 249,171 309,129 558,300 units produced 1,000 3,000 Cost per unit 249.17 103.04 total cost 558,300 Gas Cooker 249,171 249.17 Charcoal Smoker 309,129 103.04 Activity rate b) Materials acquisition and inspection (315,000/150,000) 2.1 Materials movement (16300/100) 163 Scheduling (36000/60) 600 Gas Charcoal cooker Smoker direct materials 50,000 100,000 150,000 direct labor 20,000 21,000 41,000 overhead assinged Materials & acquisition 105000 210000 315000 materials movement 13040 3260 16300 Scheduling 30000 6000 36000 total cost 218,040 340,260 558,300 units produced 1,000 3,000 cost per unit 218.04 113.42 total cost 558,300 Gas Cooker 218,040 218.04 Charcoal Smoker 340,260 113.42

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