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Alejandro Kirk Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2021,

Alejandro Kirk Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2021, Alejandro Kirk the following data for the two products:

Deluxe

Standard

Sales units

50,000

400,000

Sales price per unit

$650.00

$475.00

Direct material and labour costs per unit

$180.00

$130.00

Manufacturing support costs per unit

$80.00

$120.00

Last year, Alejandro Kirk 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. She obtained the following ABC information:

Activity

Cost Driver

Cost

Total

Deluxe

Standard

Setups

# of setups

$500,000

500

400

100

Machine related

# of machine hours

$4,000,000

600,000

300,000

300,000

Packing

# of shipments

$5,000,000

250,000

50,000

200,000

Required

  1. Using the current traditional (simple) costing system, determine the estimated:
    1. total cost of manufacturing one unit for each type of door
    2. profit per unit for each type of door
  2. Using the activity-based costing data presented above,
    1. compute the cost driver rate for each overhead activity
    2. compute the revised manufacturing overhead cost per unit for each type of entry door
    3. compute the revised total cost to manufacture one unit of each type of entry door

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