Question

Activity	of Activity		Allocation Base	Allocation Rate
Materials handling. .	$310,000		Number of parts	$0.60
Assembling. . . . . . .	$2,200,000		Direct labor hours	$13.00
Painting. . . . . . . . . . . . .	$150,000		Number of painted desks	$4.90

McKnightMcKnight

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. . . . . .	7,000	$139,900	121,500	6,300
Unpainted desk. . . . .	2,000	$28,700	31,500	800

orp. manufactures computer desks in its Austin?, Texas?, plant. The company uses? activity-based costing to allocate all manufacturing conversion costs? (direct labor and manufacturing? overhead). Its activities and related data follow. LOADING...?(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 $ 7 each and to the Unpainted desks at $ 5 each. Similar analyses were conducted of? post-manufacturing activities, such as? distribution, marketing, and customer service. The? post-manufacturing costs were $ 22 per Standard and $ 21 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 McKnight's managers set for Standard desks to earn a $ 40 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	139900	28700
Materials handling
Assembling
Painting
Total manufacturing cost
Number of units
Manufacturing cost per unit

Requirement 2. Premanufacturing? activities, such as product? design, were assigned to the Standard desks at

$ 7$7

each and to the Unpainted desks at

$ 5$5

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

$ 21$21

per Unpainted desk. Compute the full product costs per desk.

	Standard Desk	Unpainted Desk
Full product cost per unit

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

?

Full product costs

Manufacturing product costs

are reported in the financial statements. Managers use

?

full product costs

manufacturing product costs

for decisions such as pricing and product emphasis. Full product costs include the

?

costs of premanufacturing and post-manufacturing activities

direct manufacturing costs only

indirect direct manufacturing costs only

manufacturing costs only

that are expensed as incurred for external reporting.? However, these costs often are

?

assigned to products for internal decisions

ignored for the purposes of internal decision making

.

Requirement 4. What price should

McKnight'sMcKnight's

managers set for Standard desks to earn a

$ 40$40

profit per? desk?

Sales price per unit - standard desk

Choose from any list or enter any number in the input fields a

Answer 1

Answer:
Requirement 1	The per unit manufacturing cost of standard desk and unpainted desk is as follows:
		Standard Desk		Unpainted Desk
	Direct material	139900		28700
Add:	Material handling	72900	(0.6*121500)	18900	(0.6*31500)
Add:	Assembling	81900	($13*6300)	10400	($13*800)
Add:	Painting	34300	($4.90*7000)
	Total manufacturing cost	329000		58000
	Number of units	7000		2000
	Manufacturing cost per unit	47	(329000/7000)	29	(58000/2000)
Requirement 2	The full product cost per desk is as follows:
		Standard Desk	Unpainted Desk
	Manufacturing cost per unit	47	29
Add:	Product design cost	7	5
Add:	Post-manufacturing cost	22	21
	Full product cost per unit	76	55
Requirement 3	Manufacturing product costs are reported in external financial statement. Full product cost are used for management decision making. Full product cost include cost of premanufacturing and post manufacturing activities that are expenses when incurred for external financial reporting.
Requirement 4	The price McKnight's manager set for standard desk to earn a profit of $40.
		Standard Desk
	Full cost per desk	76
Add:	Profit per desk	40
	Sales price per desk	116