Average Full Costing.

The Dandy Panda Company manufactures toys. Its factory in Boston, Mass, has four production centers -stuffed animals, dolls, figurines, and packaging- and three service centers -administration, scheduling, and maintenance-.

It has controlled the following factory costs and output per month:

TABLE 1: Dandy Pandas Factory USD Cost Structure and monthly Output

Variable Fixed Output

Costs Costs (units)

Stuffed animals.... $21,000 $3,000 5,000

Dolls. 12,000 3,000 1,000

Figurines.................................... 13,000 5,000 2,000

Packaging.................................. 8,000 1,000 8,000

Administration. 10,000

Scheduling. 6,000

Maintenance. 4,000 2,000

Total. $58,000 $30,000

Packaging operations are essentially the same for each product, so the output of the packaging center consists of the sum of the outputs of the other three production centers.

a. Calculate the average direct cost of each of the company's products.

b. Apportion all service-center costs to products on the basis of their direct production costs and calculate average full cost on that basis.

c. Apportion all service-center costs to products on the basis of the number of units of output and calculate average full cost on that basis.

d. How would you choose between your answer to part b and your answer to part c? In other words, under what circumstances would you recommend that management use the unit costs in part b in preference to the unit costs in part c?