Gadgets Manufacturing manufactures two models of Dining Table and Chair Set: Des
ID: 2329066 • Letter: G
Question
Gadgets Manufacturing manufactures two models of Dining Table and Chair Set: Designer and Supreme. All Support Overhead costs are allocated to both models on the basis of direct labour (DL) dollars/cost. For 2018, Gadgets' books reveal the following pieces of information: Designer 61 000 uprene Units sold 413 000 Unit sale price Prime Cost (DM plus DL) per unit Support Overhead costs (manufacturing) per unit $851.00 $281.00 $181.00 $681.00 $231.00 $221.00 Gadgets recently automated part of the procedure for the Designer model with an aim to further improve the quality of the Designer line. The company management proposed that the company should evaluate as to whether ABC system would be better for the company to implement. She thinks that ABC system would help the company make more informed decisions on product mix and strategy decisions Gadgets books reveal the following Activity-Based information: Activity Cost Driver Activity Cost Total Activities Designer Supreme 509 200 350000 300000 $600 100 Set- Machineunumber of machine hours $45010 000 700 000 350 000 Packaging ups number of set-ups 709 number of consignments $5 901 000 351 000 51 000 Required: A. (2 marks -1 marks each) Under the current costing procedures, how would you work out: 1. the per unit manufacturing cost for each model of the Dining Table and Chair Set? 2. the profit per unit for each model of the Dining Table and Chair Set? B. (1 marks) Under the current costing procedures, the Support Overhead costs per unit for the Designer model are less ($181 per unit) compared to those of the Supreme model ($221 per unit). What do you see as the most likely reason for the difference? C. As part of the company's evaluation of the ABC system implementation, work out: (11 marks: 3 marks for '1, 6 marks for '2', and 2 marks for '3' 1. the cost-driver rate for each of the three activities, listed above 2. The ABC system-based per unit overhead cost for each model of the product. 3. The ABC system-based per unit total cost for each model of the product.Explanation / Answer
A.
1. Per unit manufacturing cost of the products
2. Profit Per unit:-
B. Support overheads cost are based on direct labour. Prime cost is consisting of Direct Materials and Direct Labour cost. The difference is because the direct labour cost of Supreme Model is higher than the Designer Model. And so, the support overhead cost for designer model are less as compared to supreme model.
C.
1. Cost Driver Rate
Set up cost = Activity Cost/Total Activities
= 600100/709
= 846.40
Machine Cost = 45010000/700000
= 64.3
Packaging Cost = 5901000/351000
= 16.81
2. ABC system based per unit overhead cost:
3. ABC System based total cost
Designer Supreme Prime Cost 281 231 Support Overhead Cost 181 221 Unit Manufacturing Cost 462 452Related Questions
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