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	3,000
Number of batches	50	10
Number of batch moves	80	20
Direct materials	$50,000	$100,000
Direct labor	$20,000	$21,000

Manufacturing overhead follows:

Activity	Cost	Cost Driver
Materials acquisition and inspection	$315,000	Amount of direct materials cost
Materials movement	16,300	Number of batch moves
Scheduling	36,000	Number of batches
	$367,300

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 8.9585 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

a)	overhead rate
	367,300/41000
	8.9585
				Gas	Charcoal
				cooker	Smoker
	direct materials			50,000	100,000
	direct labor			20,000	21,000
	overhead assinged
	Gas	(20000*8.9585)		179171
	charcoal	(21000*8.9585)			188129
	total cost			249,171	309,129	558,300
	units produced			1,000	3,000
	Cost per unit			249.17	103.04
	total cost		558,300
	Gas Cooker		249,171	249.17
	Charcoal Smoker		309,129	103.04
							Activity
							rate
b)	Materials acquisition and inspection				(315,000/150,000)		2.1
	Materials movement				(16300/100)		163
	Scheduling				(36000/60)		600
				Gas	Charcoal
				cooker	Smoker
	direct materials			50,000	100,000	150,000
	direct labor			20,000	21,000	41,000
	overhead assinged
	Materials & acquisition			105000	210000	315000
	materials movement			13040	3260	16300
	Scheduling			30000	6000	36000
	total cost			218,040	340,260	558,300
	units produced			1,000	3,000
	cost per unit			218.04	113.42
	total cost		558,300
	Gas Cooker		218,040	218.04
	Charcoal Smoker		340,260	113.42