Activity-Based Costing and Conventional Costs Compared Hickory Grill Company man
ID: 2564407 • Letter: A
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.
(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.
Explanation / Answer
Answer
Working----
A
Total Manufacturing Overhead
$131000
B
Direct Labor dollars Gas Cooker
$44000
C
Direct Labor dollars Charcoal Smoker
$56000
D=B+C
Total Direct labor dollars
$100000
E=A/D
Overhead per direct labor dollar
$1.31
Answer as per requirement
Overhead rate (A)
Direct labor Dollars (B)
Total Cost allocated (C=AxB)
Units (D)
Cost allocated per unit (C/D)
Gas cooker
1.31
44000
57640
2000
28.82
Charcoal Smoker
1.31
56000
73360
8000
9.17
TOTAL
TOTAL Overhead
$ 131000
Costs
Gas Cooker
Charcoal Smokers
Direct materials
70000
130000
Direct labor
44000
56000
Allocated Overhead
57640
73360
TOTAL COSTS
171640
259360
Units
2000
8000
Per Unit Cost [Total cost / Units]
$85.82
$32.42
Determination of Overhead rate per number of activity using Activity based Costing (ABC)
No. of activities Cost Driver
Activities
Cost (A)
Gas Cooker (b1)
Charcoal Smoker (b2)
Total B=b1+2
Overhead rate as per ABC (A/B)
material Acquisitions
68000
70000
130000
200000
0.34
per dollar material cost
material Movement
19600
90
50
140
140
per batch moves
Scheduling
43400
50
20
70
620
per number of batch
Total Overhead cost
131000
---Allocation of manufacturing Overhead based on above rates
Gas Cooker
Charcoal Smoaker
Activities
Cost (A)
Overhead Rate per no. of activity (B)
No. of activity (C )
Cost Allocated (BxC)
No. of activity (D)
Cost Allocated (BxD)
material Acquisitions
68000
0.34
70000
23800
130000
44200
material Movement
19600
140
90
12600
50
7000
Scheduling
43400
620
50
31000
20
12400
Total Overhead cost
131000
TOTAL Cost Allocated
67400
TOTAL Cost Allocated
63600
Units
2000
Units
8000
Cost allocated per unit
33.7
Cost allocated per unit
7.95
Costs
Gas Cooker
Charcoal Smokers
Direct materials
70000
130000
Direct labor
44000
56000
Allocated Overhead
67400
63600
TOTAL COSTS
181400
249600
Units
2000
8000
Per Unit Cost [Total cost / Units]
$90.7
$31.2
A
Total Manufacturing Overhead
$131000
B
Direct Labor dollars Gas Cooker
$44000
C
Direct Labor dollars Charcoal Smoker
$56000
D=B+C
Total Direct labor dollars
$100000
E=A/D
Overhead per direct labor dollar
$1.31
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