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. 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 Manufacturing overhead follows: Activity Cost Cost Driver Materials acquisition and inspection $315,000 Amount of direct materials cost Materials movement 16,300 Number of batch moves Scheduling 36,000 Number of batches $367,300 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. Total cost $Answer Gas Cooker $Answer per unit Charcoal Smoker $Answer per unit (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. Total cost $Answer Gas Cooker $Answer per unit Charcoal Smoker $Answer per unit

1

Explanation / Answer

a.

Calculations:

Manufacturing overhead for Gas Cooker = 8.9585*20,000 = 179,170.73

Manufacturing overhead for Charcoal smoker = 8.9585*21,000 = 188,129.27

Costs per unit = total costs/no. of units. For gas cooker = 249171/1000 = 249.2

(b) Allocation of costs based on activities:

Thus the answer is:

Gas Cooker Charcoal Smoker Direct materials 50,000.00 100,000.00 Direct labor 20,000.00 21,000.00 Manufacturing overhead 179,170.73 188,129.27 Total costs 249,171 309,129 (rounded off to nearset dollar) No. of units 1,000.00 3,000.00 Cost per unit 249.2 103.0 (rounded off to nearset cent)

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