Question

Homework: Chapter 19 Homework Assignment Save Score: 0 of 1 pt 1 of 1 (0 complete) HW Score: 0%, 0 of 1 pt P19-35A (similar to) Question Help McKnight, Inc. manufactures bookcases and uses an activity-based costing system. Mcknight's activity areas and related data follow (Click the icon to view the activity areas and related data) Mcknight produced two styles of bookcases in October the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow: (Click the icon to view the totals for quantities, direct materials costs, and other data) Read the requirements Requirement 1. Compute the manufacturing product cost per unit of each type of bookcase. (Enter a "0" for any zero-balances.) Standard Bookcase Unfinished Bookcase Total manufacturing cost Manufacturing cost per unit

Answer 1

1. Computation of manufacturing product cost per unit of each type of bookcase:

	Standard Bookcase	Unfinished Bookcase
Direct material cost	126000	124800
Direct labour cost	105000	81900
Material Handling cost	21000 [$1 * 21000 parts]	15600 [$1 * 15600 parts]
Assembly cost	105000 [$15*7000 direct labour hours]	81900 [$15*5460 direct labour hours]
Finishing cost	14000 [$2 * 7000 units]	15600 [$2 * 7800 units]
Total Manufacturing cost	371000	319800

Manufacturing cost per unit of Standard bookcase = $\dpi{80} \frac{371000}{7000 units}$ = $53 per unit

Manufacturing cost per unit of unfinished bookcase = $\dpi{80} \frac{319800}{7800 units}$ = $41 per unit

2. Computation of full product cost:

Full product cost = Manufacturing cost as computed above + Product design cost + Distribution, marketing and customer service costs

Full product cost of Standard Bookcase = 53 + 5 + 23 = $81

Full product cost of Unfinished Bookcase = 41 + 3 + 16 = $60

3. Full product cost are used for external financial statements whereas manufacturing costs are used for management decision making.

4. In order to earn a net profit of $17 per unfinished book case, the selling price should be Full product cost + Net profit margin = 60 + 17 = $77