Chapter 19: Q35PGA-2 (page 1077)

Question:Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar’s activity areas and related data follow:
Activity
Budgeted Cost of Activity
Allocation Base
Predetermined Overhead Allocation Rate
Materials handling
$ 240,000
Number of parts
$1.00
Assembly
3,500,000
Number of assembling direct labor hours
17.00
Finishing
190,000
Number of finished units*
4.50
*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory
Oscar 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:
Product
Total Units Produced
Total Direct materials Costs
Total Direct Labor Costs
Total Number of Parts
Total Assembling Direct Labor Hours
Standard bookcase
7,000
$91,000
$105,000
28,000
10,500
Unfinished bookcase
7,500
82,500
75,000
22,500
7,500
Requirements
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 $3 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $20 per standard bookcase and $18 per unfinished bookcase. Compute the full product costs per unit.

Short Answer

Expert verified

Answer

Full product cost per unit

For standard bookcase: $87

For unfinished bookcase: $61.93

Step by step solution

Computation of full product cost for standard bookcase

Manufacturing cost for standard bookcase computed in earlier part: $434,000

$Productdesigncost=Costperunits×No.ofunitsproduced = $ 5 \times $ 7000 = $ 35, 000 A n a l y s i s \cos t = Cost per units \times No . of units produced = $ 20 \times $ 7000 = $ 140000 T o t a l f u l l p r o d u c t i o n \cos t = M a n u f a c t u r i n g \cos t + P r o d u c t i o n d e s i g n \cos t + A n a l y s i s \cos t = $ 434, 000 + $ 35, 000 + $ 140, 000 = $ 609, 000 F u l l p r o d u c t i o \cos t p e r u n i t = \frac{T o t a l f u l l p r o d u c t i o n \cos t}{N o . o f u n i t s p r o d u c e d} = \frac{$ 609, 000}{$ 7000} = $ 87$

Computation of full product cost for unfinished bookcase

Manufacturing cost for unfinished bookcase computed in earlier part: $307,000

$Productdesigncost=Costperunits×No.ofunitsproduced = $ 3 \times $ 7000 = $ 22, 500 A n a l y s i s \cos t = Cost per units \times No . of units produced = $ 18 \times $ 7500 = $ 135000 T o t a l f u l l p r o d u c t i o n \cos t = M a n u f a c t u r i n g \cos t + P r o d u c t i o n d e s i g n \cos t + A n a l y s i s \cos t = $ 307, 000 + $ 25, 000 + $ 135, 000 = $ 464, 000 F u l l p r o d u c t i o \cos t p e r u n i t = \frac{Total full production cost}{No . of units produced} = \frac{$ 464, 000}{$ 7500} = $ 61.93$

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Activity	Allocation Base	Cost Allocated to Each Unit

Start Station	Number of raw component chassis	3 X \)1.50 = \(4.50
Dip Insertion	Number of dip insertions	? X 0.50 = 14.50
Manual Insertion	Number of manual insertions	13 X 0.40 = ?
Wave solder	Number of components solders	3 X 1.50 = 4.50
Backload	Number of backload insertions	7 X ? = 2.80
Test	Number of testing hours	0.39 60.0 = ?
Defect analysis	Number of defect analysis hours	0.10 X ? = 4.00
Total activity-based costs		\) ?

Short Answer

Step by step solution

Computation of full product cost for standard bookcase

Computation of full product cost for unfinished bookcase

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Activity	Budgeted Cost of Activity	Allocation Base	Predetermined Overhead Allocation Rate

Materials handling	\( 240,000	Number of parts	\)1.00
Assembly	3,500,000	Number of assembling direct labor hours	17.00
Finishing	190,000	Number of finished units*	4.50

Product	Total Units Produced	Total Direct materials Costs	Total Direct Labor Costs	Total Number of Parts	Total Assembling Direct Labor Hours

Standard bookcase	7,000	\(91,000	\)105,000	28,000	10,500
Unfinished bookcase	7,500	82,500	75,000	22,500	7,500