Question

Activity-Based Costing and Conventional Costs Compared
Chef 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.

	Gas Cooker	Charcoal Smoker
Units	1,000	7,000
Number of batches	40	10
Number of batch moves	80	20
Direct materials	$50,000	$100,000
Direct labor	$20,000	$28,000

Manufacturing overhead follows:

Activity	Cost	Cost Driver
Materials acquisition and inspection	$360,000	Amount of direct materials cost
Materials movement	16,600	Number of batch moves
Scheduling	30,000	Number of batches
	$406,600

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.

HINT: Use 8.4708 for overhead rate calculations.

Total cost	$Answer
Gas Cooker	$Answer	per unit
Charcoal Smoker	$Answer	per unit

(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.

Total cost	$Answer
Gas Cooker	$Answer	per unit
Charcoal Smoker	$Answer	per unit

Answer 1

	a			b	a/b
Activity	Cost	Cost driver	Cost driver units	Total	Per activity
Materials acquisition and inspection	360000	Amount of direct materials cost	50000+100000	150000	2.4
Materials movement	16600	Number of batch moves	80+20	100	166
Scheduling	30000	Number of batches	40+10	50	600
	406600
a)
Man OH allocated on the basis of direct labor
	Gas Cooker	Charcoal cooker	Total
Direct materials	50000	100000
Direct labor	20000	28000
Overhead	169416.6667	237183.3333
	406600/48000*20000	406600/48000*28000
Total	239416.6667	365183.3333	604600
Round	239417	365183
Unit	1000	7000
Per unit cost	239.417	52.169
Round	239.42	52.17
b)
Man OH allocated on the basis of ABC
	Gas Cooker	Charcoal cooker
Direct materials	50000	100000
Direct labor	20000	28000
Overhead			Per activity
Materials acquisition and inspection	120000	240000	2.4
Materials movement	13280	3320	166
Scheduling	24000	6000	600
Total	227280	377320
Unit	1000	7000
Per unit cost	227.28	53.90285714
Round	227.28	53.9

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