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 20 10 Number of batch moves 80 20 Direct materials $30,000 $100,000 Direct labor $20,000 $29,000 Manufacturing overhead follows: Activity Cost Cost Driver Materials acquisition and inspection $299,000 Amount of direct materials cost Materials movement 16,600 Number of batch moves Scheduling 18,000 Number of batches $333,600 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 6.8082 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

Explanation / Answer

Rreq A: Pre-determined OH rate on labour cost: Estimated OH / Direct labour cost*100 (299000+16600+18000) /(20000+29000) *100=680.82% pf labour cost Unit product Cost: Gas Charcoal Cooker Smoker Material 30000 100000 Labour 20000 29000 OH (680.82% of labour) 136164 197437.8 Total manufacturing Cost 186164 326438 Number of units 1000 3000 Unit product cost 186.16 108.81 Req B: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate material Acquisition material 299,000 130,000 230.00% material movement Batch moves 16,600 100 166 Schedulling Batches 18,000 30 600 GAS COOKER CHARCOAL SMOKER Overheeads assigned Rate Activity OH cost Activity OH cost material Acquisition 230% 30000 69000 100000 230000 material movement 166 80 13280 20 3320 Schedulling 600 20 12000 10 6000 94280 239320 Unit product Cost: Gas Charcoal Cooker Smoker Material 30000 100000 Labour 20000 29000 Oh 94280 239320 Total manufacturing Cost 144280 368320 Number of units 1000 3000 Unit product cost 144.28 122.77

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