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Chair Enterprise makes two variety of chairs metal and plastic. Both products pass through two producing departments. Metal chairs production is much more labour intensive
Chair Enterprise makes two variety of chairs metal and plastic. Both products pass through two producing departments. Metal chairs production is much more labour intensive than plastic chairs. The metal chair is more popular and in greater demand than the plastic chair. The following data have been gathered for the two tables for the year: Units produced Units selling price Unit prime cost Direct labour hours Machine hours Engineering labour hours Maintenance hours Number of inspections Metal Chair 20,000 $400 $100 100,000 50,000 7,500 10,000 20,000 Plastic Chair 5,000 $150 $50 30,000 100,000 2,500 15,000 5,000 Overhead costs for the year: Overhead Activity Machining Engineering Maintenance Inspections Total Activity Cost $300,000 $200,000 $100,000 $50,000 $650,000 I. II. Find the overhead cost per unit for each table by using a plantwide rate based on direct labor hours. Calculate the overhead activity rates and overhead cost per unit for each product using Activity-Based costing. Explain why the unit overhead cost assigned to each table is different under the ABC method and plant wide method. Based on your understanding of product costing. Should Chair Enterprise use the plantwide rate or ABC rates to assign overhead costs to its products? III. IV
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