Question
8. Johnson Outdoor Furniture Corp. makes and sells outdoor tables and chairs. The tables sell for $495 each and the chairs for $169 each. Direct
8. Johnson Outdoor Furniture Corp. makes and sells outdoor tables and chairs. The tables sell for $495 each and the chairs for $169 each. Direct material costs respectively are $310 each for the tables and $80 each per chair. Direct labor costs respectively are $100 each per table and the chairs $50 each. Johnson has $800,000 of Allocable Overhead. The tables take 4 hours each to make and the chairs take 1.5 hours each to manufacture. What is the total cost per table / per chair under the companys traditional costing method of allocating overhead based on the number of hours to manufacture tables vs chairs? The company clearly wants to take a closer look at this by using Activity Based Costing. As such they recognize that tables only have 3 parts whereas chairs have 14 parts. What is the total cost per table / per chair using ABC costing? In one brief sentence what should they do?
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