Activity-Based Costing and Conventional Costs Compared Hickory Grill Company man
ID: 2419496 • Letter: A
Question
Activity-Based Costing and Conventional Costs Compared
Hickory 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.
Manufacturing overhead follows:
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 1.6939 for overhead rate calculations.
(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.
Explanation / Answer
(a) 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:
Gas Cooker : Total = $99265.80 and Per Unit = $99.27
Charcoal Smoker :Total = $172735.30 and Per Unit = $34.55
(b) 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:
Gas Cooker : Total = $110400 and Per Unit = $110.40
Charcoal Smoker :Total = $161600 and Per Unit = $32.32
Gas Cooker Charcoal Smoker Cost element Unit Cost $ Total cost $ Unit Cost $ Total cost $ Units produced 1000 units 5000 units Direct materials 40 40,000 20 100,000 Direct labor 22 22000 5.40 27000 Manufacturing overhead 37.27 37265.80 9.15 45735.30 Total 99.27 99265.80 34.55 172735.30