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Decorative Doors, Inc., produces two types of doors, interior and exterior. The company's simple costing system has two direct-cost categories (materials and labor) and one
Decorative Doors, Inc., produces two types of doors, interior and exterior. The company's simple costing system has two direct-cost categories (materials and labor) and one indirect-cost pool. The simple costing system allocates indirect costs on the basis of machine-hours. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Decorative Doors production for the most recent year follows: (Click the icon to view the production data.) A (Click the icon to view additional Information.) Read the requirements Requirement 1. Calculate the cost of an interior door and an exterior door under the existing simple costing system. Before calculating the cost of an interior and exterior door, begin by calculating the overhead rate under the simple costing system. First select the formula, then enter the applicable amounts and calculate the rate. (Round your answer to the nearest cent. Abbreviations used: bgt. = budgeted, qty = quantity.) Bgt. total direct material costs Total number of units sold Budgeted overhead rate Simple costing system per machine-hour per inspection per machine-hour per machine setup per material move per production run Data Table Interior Exterior Units sold 3,200 1,800 $ 125 $ 200 $ 30 $ 45 $ 16 $ 16 1.50 2.25 Selling price Direct material cost per unit Direct manufacturing labor cost per hour Direct manufacturing labor-hours per unit Production runs Material moves Machine setups Machine-hours Number of inspections 40 85 72 168 45 155 5,500 4,500 250 150 More Info The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect-cost pool for Decorative Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Decorative Doors collected the following data related to the indirect-cost activities: Activity Cost Activity-Cost Driver 95,000 Production runs Activity Production scheduling Material handling Machine setup Assembly $ 45,000 Material moves $ 25,000 Machine setups $ 60,000 Machine-hours Inspection $ 8,000 Number of inspections Marketing costs were determined to be 3% of the sales revenue for each type of door
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