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Activity-Based Costing and Conventional Costs Compared Chef Grill Company manufactures two types of cooking grills: the Gas...

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Accounting

Activity-Based Costing and Conventional Costs Compared
Chef Grill Company manufactures two types of cooking grills: theGas Cooker and the Charcoal Smoker. The Cooker is a premium productsold in upscale outdoor shops; the Smoker is sold in major discountstores. Following is information pertaining to the manufacturingcosts for the current month.

Gas CookerCharcoal Smoker
Units1,0007,000
Number of batches4010
Number of batch moves8020
Direct materials$50,000$100,000
Direct labor$20,000$28,000

Manufacturing overhead follows:

ActivityCostCost Driver
Materials acquisition and inspection$360,000Amount of direct materials cost
Materials movement16,600Number of batch moves
Scheduling30,000Number of batches
$406,600

Rounding instructions: Do not round until yourfinal answers. Round total cost answers to the nearest dollar andper unit answers to the nearest cent.

(a) Determine the total and per-unit costs of manufacturing theGas Cooker and Charcoal Smoker for the month, assuming allmanufacturing overhead is assigned on the basis of direct labordollars.

HINT: Use 8.4708 for overhead ratecalculations.

Total cost$Answer
Gas Cooker$Answerper unit
Charcoal Smoker$Answerper unit

(b) Determine the total and per-unit costs of manufacturing theGas Cooker and Charcoal Smoker for the month, assumingmanufacturing overhead is assigned using activity-basedcosting.

Total cost$Answer
Gas Cooker$Answerper unit
Charcoal Smoker$Answerper unit

Answer & Explanation Solved by verified expert
4.3 Ratings (711 Votes)

Solution:
a. Total cost                       604,598
Gas Cooker 239.42 per unit
Charcoal Smoker 52.17 per unit
Working Notes:
Gas Cooker Charcoal Smoker Total cost
I Direct materials $50,000 $100,000 $150,000
II Direct labor $20,000 $28,000 $48,000
III manufacturing overhead $169,416.00 $237,182.40 $406,598.40
[8.4708 x $20,000] [8.4708 x $28,000]
IV=I+II+III Total cost $239,416.00 $365,182.40 $604,598
÷
V Units 1000 7000
VI=IV/V per-unit costs of manufacturing $                     239.42 $                         52.17
[239,416/1000] [365,182.40/7000]
b.
Total cost                       604,600
Gas Cooker 227.28 per unit
Charcoal Smoker 53.90 per unit
Working Notes:
Total cost Gas Cooker Total cost
I Direct materials $50,000 $100,000 $150,000
II Direct labor $20,000 $28,000 $48,000
III manufacturing overhead
IV Materials acquisition and inspection $120,000 $240,000 $360,000
[$50,000 x 2.40] [$100,000 x 2.40]
V Materials movement $13,280 $3,320 $16,600
[80 x 166 ] [20 x 166 ]
VI Scheduling $24,000 $6,000 $30,000
[40 x 600 ] [10 x 600 ]
VII=I+II+III+IV+V+VI Total cost $227,280 $377,320 $604,600
÷
VIII Units 1000 7000
IX=VII/VIII per-unit costs of manufacturing $                     227.28 $                         53.90
[227,280/1000] [377,320/7000]
Notes: Computation of cost pool
A B C=A/B
Activity Cost Driver Cost total base Activity rate
Materials acquisition and inspection Amount of direct materials cost $360,000 150,000 2.40
[50,000+100,000]
Materials movement Number of batch moves 16,600 100 166
[80+20]
Scheduling Number of batches 30,000 50 600
[40+10]
Total $406,600
Please feel free to ask if anything about above solution in comment section of the question.

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