Activity Based Costing (20 marks) Come-On-In Manufacturing produces two types of entry doors: Standard and Deluxe. The assignment basis for manufacturing overheads has been direct labour hours. For 2019, Come-On-In compiled the following data for the two products: Standard Deluxe Sales units 400,000 Doors 50,000 Doors Sales price per unit $475.00 $710.00 Direct material and labour costs per unit $130.00 $180.00 Manufacturing overhead costs per unit $120.00 $ 80.00 Direct labour hours 40,000 hours 10,000 hours Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. The following information for 2019 was provided after consulting with operating personnel. Activity Activity Measure Activity costs Standard Deluxe Setups Number of setups $ 2,900,000 100 400 Material handling Number of handling hours $44,100,000 300,000 300,000 Designing Number of design hours $ 5,000,000 12,000 8,000 $52,000,000 Required: (a) Using the current system, determine the estimated total cost of manufacturing one unit for each type of door and profit per unit for each type of door. 1 (a) Product cost and profit under current system Standard Deluxe Direct material and labour cost $130.00 $180.00 Manufacturing overhead cost $120.00 $80.00 Product cost $250.00 $260.00 Sales price $475.00 $710.00 Profit per unit $225.00 $450.00 Profit margin (%) 47.4% 63.4% (4 marks) (b) Compute the activity rates for the activity cost pools. (1.5 marks) (c) Determine the total manufacturing overheads assigned to two products under activity-based costing system (4.5 marks) (d) Using the activity-based costing, determine the estimated total cost of manufacturing one unit for each type of door and profit per unit for each type of door. (2 marks)

(e) Is the deluxe door as profitable as the original data estimated? Why or why not? Explain. (3 marks) (f) The data in Come-On-In Manufacturing explains why manufacturing overhead costs often shift from high-volume products to low-volume products when an activity-based costing system is used. (3 marks)