(L.OBJ. 1, 2) Product costing in an ABC system [20—30 min] Johnston, Inc., manufactures...

(L.OBJ. 1, 2) Product costing in an ABC system [20—30 min] Johnston, Inc., manufactures bookcases arid uses an activity-based costing system. Johnston’s activity areas and related data follow:

Johnston produced two styles of bookcases in May: 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:

1. Compute the manufacturing product cost per unit of each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcases at $6 each, and to the unfinished bookcases at $2 each. Similar analyses were conducted of postmanufacturing activities such as distribution, marketing, and customer service. The postrnanufacturing costs were $23 per standard bookcase and $14 per unfinished bookcase. Compute the full product costs per unit.

3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.

4. What price should Johnston’s managers set for unfinished bookcases to earn a unit profit of $15?