Could someone help me understand how to solve this problem please?! Johnston, In
ID: 2335430 • Letter: C
Question
Could someone help me understand how to solve this problem please?!
Johnston, Inc. manufactures bookcases and uses an activity-based costing system. Johnston's activity areas and related data follow EE (Click the icon to view the activity areas and related data ) Johnston produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow EEB Click the icon to view the totals for quantities, direct materials costs, and other data.) Read the requirements Requirement 1. Compute the manufacturing product cost per unit of each type of bookcase. (Enter a "0 for any zero-balances.) Standard Bookcase Unfinished Bookcase Direct materials Direct labor Materials handling Assembling Finishing Total manufacturing cost Number of units Manufacturing cost per unit Requirement 2. Suppose that pre-manufacturing activities, such as product design, were assigned to the standard bookcases at $5 each and to the unfinished bookcases at $4 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $22 per standard bookcase and $15 per unfinished bookcase. Compute the full product costs per unit. Standard Bookcase Unfinished Bookcase Pre-manufacturing activities Manufacturing product cost Pre-manufacturing activities Full product cost per unitExplanation / Answer
Hey,
Activity-based costing as the name suggest costing is done based on the activity. Here there are different activities like material handling finishing etc. we need to allocate such activities based on the cost drivers, in this question, it is clearly available (predetermined overhead allocation rate). so we need to allocate those overheads based on the allocation rate provided.
You will understand much better by looking into the solution below:
Requirement 3
Full Product costs which include Cost of Pre-manufacturing, manufacturing and post-manufacturing activities are reported in financial statements. Managers use manufacturing Product costs which include manufacturing cost only for decision making
Requirement 4
Price to be charged for unfinished bookcase =68+16=84
Requirement 1 Particulars Standard Bookcase Unfinished Bookcase Direct Material 90000 92800 Direct Labour 90000 69600 Material Handling 40000(20000*2) 34800(17400*2) Assembly 112500(7500*15) 87000(5800*15) Finishing 22500(5000*4.5) 0 Total Manufacturing cost 355000 284200 Number of units 5000 5800 Manufacturing cost per unit 71 49 Requirement 2 Particulars Standard Bookcase Unfinished Bookcase Pre Manufacturing activities 5 4 Manufacturing Product cost 71 49 Post Manufacturing cost 22 15 Full Product cost per unit 98 68