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	$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

a)	overhead rate
	346,900/(20,000+27000)
	7.3809
				Gas	Charcoal
				cooker	Smoker
	direct materials			20,000	100,000
	direct labor			20,000	27,000
	overhead assinged
	Gas	(20000*7.3809)		147617
	charcoal	(27000*7.3809)			199283
	total cost			187,617	326,283	513,900
	units produced			1,000	4,000
	Cost per unit			187.62	81.57
	total cost		513,900
	Gas Cooker		187,617	187.62
	Charcoal Smoker		326,283	81.57
							Activity
							rate
b)	Materials acquisition and inspection				(288000/120,000)		2.4
	Materials movement				(16900/100)		169
	Scheduling				(42000/70)		600
				Gas	Charcoal
				cooker	Smoker
	direct materials			20,000	100,000	120,000
	direct labor			20,000	27,000	47,000
	overhead assinged
	Materials & acquisition			48000	240000	288000
	materials movement			13520	3380	16900
	Scheduling			36000	6000	42000
	total cost			137,520	376,380	513,900
	units produced			1,000	4,000
	cost per unit			137.52	94.10
	total cost		513,900
	Gas Cooker		137,520	137.52
	Charcoal Smoker		376,380	94.10