Hone€™s Office Department manufactures computer desks in its Moosejaw, Saskatchewan, plant. The company uses activity-based costing to allocate all manufacturing conversion costs (direct labour and manufacturing overhead). Its activities and related data follow.

Hone produced two styles of desks in March: the Standard desk and Unpainted desk.
Data for each follow:

Requirements
1. Compute the per-unit manufacturing product costs of Standard desks and Unpainted desks.
2. Premanufacturing activities, such as product design, were assigned to the Standard desks at $5 each and to the Unpainted desks at $3 each. Similar analyses were conducted of post- manufacturing activities, such as distribution, marketing, and customer service. The post- manufacturing costs were $25 per Standard and $22 per Unpainted desk. Compute the full product costs per desk.
3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
4. What price should Hone€™s managers set for Standard desks to earn a $42 profit per desk?

Transcribed Image Text:

Budgeted Cost of Activity Allocation Base Activity Materials handling Assemblin Painting 300,000 Number of parts 2,500,000 170,000 Cost Allocation Rate 0.60 15.00 5.00 Direct labour hours Number of painted desks ... Total Total Total Direct Toal Assembling Units Materials Number Direct Produced Costs of Parts Labour Hours Product Standard desk... Unpainted desk 6,000 $96,000 120,000 6,000 21,000 30,000 1 1,500 900