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1 (14 points) Rango Company manufactures two types of sofas, cloth and leather. Cloth sofas require no polishing activities. Rango Company adopts the activity-based costing
1 (14 points) Rango Company manufactures two types of sofas, cloth and leather. Cloth sofas require no polishing activities. Rango Company adopts the activity-based costing system (ABC) with two direct-cost cate- gories (direct materials and direct manufacturing labor) and four indirect-cost pools to allocate its manufacturing overhead costs. The following is the company's activity cost pools and related data for the current year: Cost driver used as Estimated volume for Activity cost pool Estimated cost allocation base cost driver Parts sorting $ 400,000 Number of parts 800,000 parts Sewing 1,200,000 Machine hours 40,000 hours Assembly Leather Polishing 3,000,000 1,320,000 Direct labor hours 150,000 hours Number of sofas polished 60,000 sofas In the month of May, both types of sofas are produced. The relevant production costs and data are as follows: Units Direct Machine Number produced material hours of parts Direct labor hours Leather sofas 5,000 $600,000 5,000 100,000 6,000 Cloth sofas 1,000 200,000 500 10,000 3,000 Additional information: Direct labor is paid $25 per hour. The company's non-manufacturing activities are as follows: product design of the leather sofa is at $10 each and that of the cloth sofa is at $15 each. Support costs allocated are $50 per leather sofa and $80 per cloth sofa. Required (a) Compute total manufacturing costs of the leather and cloth sofas for May. (8%) (b) Compute manufacturing costs per unit of the leather and cloth sofas for May. (2%) (c) Compute product cost per unit of the leather and cloth sofas including the non-manufacturing costs for May. (4%)
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