Lawton, Inc., manufactures bookcases and uses an activity-based costing system. Lawton's activity areas and related data follow.

Lawton produced two styles of bookcases in April: 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.

Requirements 

1. Compute the manufacturing product cost per unit of each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcases at \(\$ 4\) 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 S20 per standard bookcase and \(\$ 15\) per unfinished bookcase. Compute the full product costs per unit.

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 Lawton's managers set for unfinished bookcases to earn a unit profit of \(\$ 16\) ? 

Transcribed Image Text:

Activity Budgeted Cost of Activity Materials handling $ 200,000 Number of parts Assembling 3,000,000 Direct labor hours Finishing 160,000 Number of finished units Allocation Base Cost Allocation Rate $ 0.80 15.00 3.90