Activity-Based Costing and Conventional Costs Compared

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LO2, 3, 4 E18-22. Activity-Based Costing and Conventional Costs Compared Hickory Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoal MBC 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 cur- rent month. Gas Cooker Charcoal Smoker Units ..... . ............. 2,000 8,000 Number of batches... . ... 50 20 Number of batch moves..... .. 90 50 Direct materials........ . .... $70,000 $130,000 Direct labor...... $44,000 $56,000 Manufacturing overhead follows: Activity Cost Cost Driver Materials acquisition and inspection $ 68,000 Amount of direct materials cost Materials movement . ...... 19,600 43,400 Number of batch moves Scheduling .......... ... Number of batches $131,000 REQUIRED 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. 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.E18-23. Activity-Based Costing Versus Conventional Costing LO1, 3, 4 Refer to the previous exercise in E18-22 for Hickory Grill. REQUIRED a. Comment on the differences between the solutions to requirements (a) and (b). Which is more accurate? What errors might managers make if all manufacturing overhead costs are assigned on the basis of direct labor dollars? b. Hickory Grill's manufacturing process has become increasingly automated over the past few years. Discuss how this will likely impact its ability to accurately measure product costs. Comment on the adequacy of the preceding data to meet management's needs