Activity-Based Costing and Conventional Costs Compared Hickory Grill Company man

Question

Activity-Based Costing and Conventional Costs Compared

Hickory 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 1.6939 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 5,000 Number of batches 40 10 Number of batch moves 80 40 Direct materials $ 40,000 $ 100,000 Direct labor $ 22,000 $ 27,000

Explanation / Answer

(a) 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:

Gas Cooker : Total = $99265.80 and Per Unit = $99.27

Charcoal Smoker :Total = $172735.30 and Per Unit = $34.55

(b) 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 : Total = $110400 and Per Unit = $110.40

Charcoal Smoker :Total = $161600 and Per Unit = $32.32

Gas Cooker Charcoal Smoker Cost element Unit Cost $ Total cost $ Unit Cost $ Total cost $ Units produced 1000 units 5000 units Direct materials 40 40,000 20 100,000 Direct labor 22 22000 5.40 27000 Manufacturing overhead 37.27 37265.80 9.15 45735.30 Total 99.27 99265.80 34.55 172735.30

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