Activity-Based Costing and Conventional Costs Compared

Hickory Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoal Smoker. The Cooker is a premium product sold in upscale outdoor shops; the Smoker is sold in major discount stores. Following is information pertaining to the manufacturing costs for the current month.

	Gas Cooker	Charcoal Smoker
Units	1,000	5,000
Number of batches	40	10
Number of batch moves	80	40
Direct materials	$ 40,000	$ 100,000
Direct labor	$ 22,000	$ 27,000

Manufacturing overhead follows:

Activity	Cost	Cost Driver
Materials acquisition and inspection	$ 30,800	Amount of direct materials cost
Materials movement	16,200	Numbers of batch moves
Scheduling	36,000	Number of batches
	$ 83,000

Rounding instructions: Do not round until your final answers. Round total cost answers to the nearest dollar and per unit answers to the nearest cent.

(a) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming all manufacturing overhead is assigned on the basis of direct labor dollars.

HINT: Use 1.6939 for overhead rate calculations.

(b) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming manufacturing overhead is assigned using activity-based costing.