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	4,000
Number of batches	60	10
Number of batch moves	80	20
Direct materials	$20,000	$100,000
Direct labor	$20,000	$27,000

Manufacturing overhead follows:

Activity	Cost	Cost Driver
Materials acquisition and inspection	$288,000	Amount of direct materials cost
Materials movement	16,900	Number of batch moves
Scheduling	42,000	Number of batches
	$346,900

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 7.3809 for overhead rate calculations.

Total cost $_____
Gas Cooker		$__________per unit
Charcoal Smoker		$_________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 $_____________
Gas Cooker		$_________per unit
Charcoal Smoker $__________		per unit

Answer 1