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 7.3809 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 4,000 Number of batches 60 10 Number of batch moves 80 20 Direct materials $20,000 $100,000 Direct labor $20,000 $27,000

Explanation / Answer

a) overhead rate 346,900/(20,000+27000) 7.3809 Gas Charcoal cooker Smoker direct materials 20,000 100,000 direct labor 20,000 27,000 overhead assinged Gas (20000*7.3809) 147617 charcoal (27000*7.3809) 199283 total cost 187,617 326,283 513,900 units produced 1,000 4,000 Cost per unit 187.62 81.57 total cost 513,900 Gas Cooker 187,617 187.62 Charcoal Smoker 326,283 81.57 Activity rate b) Materials acquisition and inspection (288000/120,000) 2.4 Materials movement (16900/100) 169 Scheduling (42000/70) 600 Gas Charcoal cooker Smoker direct materials 20,000 100,000 120,000 direct labor 20,000 27,000 47,000 overhead assinged Materials & acquisition 48000 240000 288000 materials movement 13520 3380 16900 Scheduling 36000 6000 42000 total cost 137,520 376,380 513,900 units produced 1,000 4,000 cost per unit 137.52 94.10 total cost 513,900 Gas Cooker 137,520 137.52 Charcoal Smoker 376,380 94.10

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