Creek, Inc. manufactures DVDs used for recording digital content. In the past, it has used traditional costing methods for allocating manufacturing overhead. It is considering the possibility of using activity based costing as an alternative to allocate manufacturing overhead. The accountants for the company have arrived at the attached estimates for the upcoming year for production. During the month of June of the current year, the company manufactured 800,000 DVDs with the attached costs and cost driver usage. REQUIRED: (1) (2) Calculate the total amount of manufacturing overhead that the company should charge to production using activity based costing for the month of June. Round all calculations to the nearest whole dollar. Calculate the total manufacturing costs and the manufacturing cost per unit for production for the month of June using activity based costing. Round your cost per unit to five decimal places. Activity Center Materials Handling Quality Inspections Machine Setups Machine Operations CREEK, INC. ESTIMATED DATA FOR ACTIVITY BASED COSTING FOR UPCOMING YEAR Cost Driver Predetermined Rate Per Unit of Cost Driver Pounds of Material Handled $ 12.50 per pound Number of Inspections $ 75.00 per inspection Number of Setups $ 1,200.00 per setup Number of Machine Hours $ 15.00 per machine hour CREEK, INC. ACTUAL PRODUCTION RESULTS FOR MONTH OF JUNE $ Direct Materials Used $ 160,000 200,000 4,500 Direct Labor Pounds of Materials Handled Number of Inspections Number of Machine Setups Machine Hours Used 625 40 27,500 Interior designers use the carpet products of Piscataway Mills, Inc. The company's top product is the Luxury blend. During the month of July 20X4, the company produced 200,000 square yards of this carpet and sold 180,000 square yards of what was produced. There were no beginning inventories at the beginning of July and no work in process inventory at the end of July. Production and other costs for the month are provided below. $ PISCATAWAY MILLS, INC. PRODUCTION AND COST DATA FOR MONTH OF JULY 20X4 Direct Materials Used Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling and Administrative Expenses Fixed Selling and Administrative Expenses 1,000,000 750,000 900,000 350,000 175,000 390,000 The company sells this carpet for $22.50 per square yard. REQUIRED: (1) Using the attached forms, prepare an income statement for the month of July 2004 using full absorption costing. Round all calculations to the nearest whole dollar. Using the attached forms, prepare an income statement for the month of July 2004 using variable costing. Round all calculations to the nearest whole dollar. (2) (1) PISCATAWAY MILLS, INC. INCOME STATEMENT--FULL ABSORPTION COSTING FOR MONTH OF JULY 20X4 Sales Revenue Cost of Goods Sold: Beginning Finished Goods Inventory Cost of Goods Manufactured: Total Cost of Goods Manufactured Total Cost of Goods Available For Sale Less: Ending Finished Goods Inventory Cost of Goods Sold Gross Margin From Sales Operating Expenses: Total Operating Expenses Operating Income 2 PISCATAWAY MILLS, INC. INCOME STATEMENT--VARIABLE COSTING FOR MONTH OF JULY 20X4 Sales Revenue Variable Cost of Goods Sold: Beginning Finished Goods Inventory Variable Cost of Goods Manufactured: Total Variable Cost of Goods Manufactured Total Cost of Goods Available For Sale Less: Ending Finished Goods Inventory Variable Cost of Goods Sold Manufacturing Margin Less Other Variable Costs: Total Other Variable Costs Contribution Margin Fixed Costs: Total Fixed Costs Operating Income
