Question

Activity-Based Costing and Conventional Costs Compared Hickory Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoa 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 cur- rent month. Charcoal Smoker Gas Cooker 8,000 2,000 Units..... 20 50 Number of batches. 50 90 Number of batch moves.. Direct materials.... Direct labor.... $130,000 $56,000 $70,000 $44,000 Manufacturing overhead follows: Cost Driver Cost Activity Amount of direct materials cost Number of batch moves Materials acquisition and inspection Materials movement Scheduling $68,000 19,600 43,400 Number of batches $131,000

Answer 1

ANSWER:

Answer for a

With reference above a & b, b is more accurate.

because under a, there is only direct labor dollars only taken into consideration for allocation of overhead.

where as under b, there we have taken some different cost driver based the activity for allocation of overhead.

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