Deegan. (2016).Financial Accounting. McGraw-Hill Education, Australia

Tables Galore produces two types of tables, wood and plastic. Both products pass through two producing departments. Wood tables production is much more labour-intensive than plastic tables. The wood table is more popular and in greater demand than the plastic table. The following data have been gathered for the two tables for the year: Wood Table Plastic Table Units produced 40,000 10,000 Unit Selling Price $800 $300 Unit prime cost $200 $100 Direct labour hours 200,000 60.000 Machine hours 100,000 200,000 Engineering labour hours 15,000 5,000 Maintenance hours 20,000 30,000 Number of inspections 40,000 10.000 The following information relates to the overhead costs for the year: Overhead Activity Activity Cost Machining $600,000 Engineering $400,000 Maintenance $200,000 Inspections $100,000 Total $1,300,000 Required: 1. Calculate the overhead cost per unit for each table by using a plantwide rate based on direct labour hours. 2. Calculate the overhead activity rates and overhead cost per unit for each product using Activity-Based Costing (ABC). 3. Explain why the unit overhead cost assigned to each table is different under the ABC method and plantwide method. 4. Based on your understanding of product costing, advise Tables Galore as to whether it should use the plantwide rate or ABC rates to assign overhead costs to its products. 5. The current selling price of a wood table is $800 per unit and the sales manager of Tables Galore is considering offering a $100 discount on price to increase sales. Should the discount be applied if Tables Galore uses the ABC method to allocate its overhead cost? Briefly discuss and show relevant calculations