Question

Arnett Corp. manufactures computer desks in its

White Bear LakeWhite Bear Lake​,

MinnesotaMinnesota​,

plant. The company uses​ activity-based costing to allocate all manufacturing conversion costs​ (direct labor and manufacturing​ overhead). Its activities and related data follow.

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​(Click the icon to view the activity areas and related​ data.)

Requirements

1.	Compute the​ per-unit manufacturing product cost of Standard desks and Unpainted desks.
2.	Premanufacturing​ activities, such as product​ design, were assigned to the Standard desks at $ 6$6 each and to the Unpainted desks at $ 2$2 each. Similar analyses were conducted of​ post-manufacturing activities, such as​distribution, marketing, and customer service. The​ post-manufacturing costs were $ 22$22 per Standard and $ 19$19 per Unpainted desk. Compute the full product costs per desk.
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 Arnett'sArnett's managers set for Standard desks to earn a $ 42$42 profit per​ desk?

Requirement 1. Compute the​ per-unit manufacturing product cost of Standard desks and Unpainted desks. ​(Complete all input boxes. Enter a​ "0" for any zero amounts. Round your answers to the nearest whole​ dollar.)

	Standard Desk	Unpainted Desk
Direct materials
Materials handling
Assembling
Painting
Total manufacturing cost
Number of units
Manufacturing cost per unit DATA TABLE Budgeted Cost Cost Activity of Activity Allocation Base Allocation Rate Materials handling. . . $330,000 Number of parts $0.80 Assembling. . . . . . . $2,500,000 Direct labor hours $12.00 Painting. . . . . . . . . . $170,000 Number of painted desks $4.90 ArnettArnett produced two styles of desks in​ March: the Standard desk and Unpainted desk. Data for each​ follow: Total Total Direct Total Total Assembling Units Materials Number Direct Labor Product Produced Costs of Parts Hours Standard desk. . . . . . 7,500 $178,950 118,500 6,000 Unpainted desk. . . . . 1,500 $6,300 28,500 1,200

Answer 1

1)

	Standard desk	Unpainted desk
Direct material	178950	118500
Material handling	94800    [118500*80]	22800    [28500*.80]
Assembling	72000    [12*6000]	14400    [1200*12]
Painting	36750    [7500*4.9]	0             [since its unpainted]
Total manufacturing cost	382500	155700
Number of units	7500	1500
manufacturing cost per unit	51      [382500/7500]	103.8       [155700/1500]

2)

	standard desk	unpainted desk
Manufacturing cost per unit	51	103.8
premanufacturing cost	6	2
post manufacturing cost	22	19
Full cost	79	124.8

3)

	standard desk	unpainted desk
Cost for financial reporting purpose	51+6=57	103.8+2=105.8
cost used for management decision	79	124.80

There is a difference between the two reportable cost this is so because for reporting cost for financial purpose only cost of manufacturing the product is used (total manufacturing cost plus pre manufacturing cost )is used that is cost incurred to make asset ready for use.

And for management decision ,total cost of product is used to analyse whether the product is profitable or not.

4)Price to set for standard desk= total cost+ profit

       = 79+42

         = $121 per desk