Question

D2,3,4 E18-22. 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 cur- rent month. Charcoal Smoker Gas Cooker 2,000 8,000 Units ................................................... Number of batches........... Number of batch moves.......... Direct materials............ Direct labor..... .. 50 90 $70,000 $44,000 $130,000 $56,000 Manufacturing overhead follows: Cost Cost Driver Activity Materials acquisition and inspection ..... Materials movement..... Scheduling... $ 68,000 19,600 43,400 $131,000 Amount of direct materials cost Number of batch moves Number of batches REQUIRED 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.

Answer 1

Answer

• Requirement [a]

	Gas Cooker	Charcoal Smoker
Direct Material	$70,000	$130,000
Direct Labor	$44,000	$56,000
Overhead allocated	$57,640	$73,360
Total Cost	$171,640	$259,360
Units	2000	8000
Cost per unit	$              85.82	$                           32.42

--Working

	Gas Cooker	Charcoal Smoker
Total Overhead Cost allocated	$57,640	$73,360
	[$131000/($44000+$56000) x $44000]	[$131000/($44000+$56000) x $56000]

• Requirement [b]

	Gas Cooker	Charcoal Smoker
Direct Material	$70,000	$130,000
Direct Labor	$44,000	$56,000
Overhead allocated	$73,520	$57,480
Total Cost	$187,520	$243,480
Units	2000	8000
Cost per unit	$              93.76	$                           30.44

--Working

	Cost	Totl Driver	Activity rates
Material acquisition & Inspection	$68,000	100000	$0.68
Material movement	$19,600	140	$140.00
Scheduling	$43,400	70	$620.00

	Gas Cooker	Charcoal Smoker
Total Overhead cost allocated	$73,520	$57,480
	(44000*0.68)+(90*140)+(50*620)	(56000*0.68)+(50*140)+(20*620)