F#17

Corp. manufactures computer desks in its

Rochester,

New York,

plant. The company uses activity-based costing to allocate all manufacturing conversion costs (direct labor and manufacturing overhead). Its activities and related data follow.

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(Click the icon to view the activity areas and related data.)Read the requirements

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Requirement 1. Compute the per-unit manufacturing product cost of Standard desks and Unpainted desks. (Complete all input fields. Enter a "0" for any zero amounts. Round your answers to the nearest whole dollar.)

	Standard Desk	Unpainted Desk
Direct materials
Materials handling
Assembling
Painting
Total manufacturing cost
Number of units
Manufacturing cost per unit

Requirement 2. Premanufacturing activities, such as product design, were assigned to the Standard desks at

$4

each and to the Unpainted desks at

$2

each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were

$20

per Standard and

$19

per Unpainted desk. Compute the full product costs per desk.

	Standard Desk	Unpainted Desk
Full product cost per unit

Requirement 3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.

Full product costs

Manufacturing product costs

are reported in the financial statements. Managers use

full product costs

manufacturing product costs

for decisions such as pricing and product emphasis. Full product costs include the

costs of premanufacturing and post-manufacturing activities

direct manufacturing costs only

indirect direct manufacturing costs only

manufacturing costs only

that are expensed as incurred for external reporting. However, these costs often are

assigned to products for internal decisions

ignored for the purposes of internal decision making

.Requirement 4. What price should

Johnston's

managers set for Standard desks to earn a

$38

profit per desk?

Sales price per unit - standard desk

Data table

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Activity	Budgeted Cost of Activity	Allocation Base	Cost Allocation Rate
Materials handling. . .	$310,000	Number of parts	$0.60
Assembling. . . . . . . . .	$2,500,000	Direct labor hours	$16.00
Painting. . . . . . . . . . .	$150,000	Number of painted desks	$5.20

Johnston

produced two styles of desks in March: the Standard desk and Unpainted desk. Data for each follow:

Product	Total Units Produced	Total Direct Materials Costs	Total Number of Parts	Total Assembling Direct Labor Hours
Standard desk. . . . .	7,000	$141,700	118,500	6,300
Unpainted desk. . . .	1,500	$22,700	28,500	700

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