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 20 10 Number of batch moves 80 20 Direct materials $30,000 $100,000 Direct labor $20,000 $29,000 Manufacturing overhead follows: Activity Cost Cost Driver Materials acquisition and inspection $299,000 Amount of direct materials cost Materials movement 16,600 Number of batch moves Scheduling 18,000 Number of batches $333,600 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 6.8082 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

Rreq A:
Pre-determined OH rate on labour cost: Estimated OH / Direct labour cost*100
			(299000+16600+18000) /(20000+29000) *100=680.82% pf labour cost
Unit product Cost:
			Gas	Charcoal
			Cooker	Smoker
Material			30000	100000
Labour			20000	29000
OH (680.82% of labour)			136164	197437.8
Total manufacturing Cost			186164	326438
Number of units			1000	3000
Unit product cost			186.16	108.81
Req B:
STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL
			Activity	Total	Expected	Activity
ACTIVITY COST POOL			Measures	Overheads	Activity	Rate
material Acquisition			material	299,000	130,000	230.00%
material movement			Batch moves	16,600	100	166
Schedulling			Batches	18,000	30	600
				GAS COOKER		CHARCOAL SMOKER
Overheeads assigned			Rate	Activity	OH cost	Activity	OH cost
material Acquisition			230%	30000	69000	100000	230000
material movement			166	80	13280	20	3320
Schedulling			600	20	12000	10	6000
					94280		239320
Unit product Cost:
			Gas	Charcoal
			Cooker	Smoker
Material			30000	100000
Labour			20000	29000
Oh			94280	239320
Total manufacturing Cost			144280	368320
Number of units			1000	3000
Unit product cost			144.28	122.77