Please help solve the Requirement 4 only!!! Thanks!
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 Docrs production for the most recent year follows: (Click the icon to view the production data.) (Click the icon to view additional information.) Read the requirements X Requirements 1. Calculate the cost of an interior door and an exterior door under the existing simple costing system. 2. Calculate the cost of an Interior door and an exterior door under an activity-based costing system. 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior and exterior door? 4. How might Decorative Doors, Inc., use the new cost information from its activity-based costing system to address the declining market share for interior doors? Print Done 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.) Budgeted overhead rate + Bgt. total qty of cost allocation base = Bgt. total costs in indirect cost pool $ 257,590 Simple costing system $ 25.76 per machine-hour 10,000 Now calculate the cost of an interior door and an exterior door under the existing simple costing system. Start by calculating total costs and then calculate the cost per unit for each product. (Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.) Interior Exterior Simple costing system Direct materials cost Direct manufacturing labor cost 135,000 $ 104,000 75,600 66,240 Indirect cost allocated 154,560 103,040 365,160 $ 273,280 Total costs Now calculate the cost per unit for each product under the simple costing system. (Round your answers to the nearest cent.) Simple costing system Interior Exterior Total cost per unit 121.72 $ 170.80 Requirement 2. Calculate the cost of an interior door and an exterior door under an activity-based costing system. Begin by calculating the ABC allocation rate for each activity. First select the formula, then enter the applicable amounts and calculate the rales. (Round your answers to the nearest cent. Abbreviations used: Bgt. - Budgeled, mach. - machine, mal. - material, prod. - production, sch-scheduling, aly. - quantity.) Bgt cost of activity + Bgt, total aty, of cost allocation base = ABC allocation rate Prod. sch S 88,900 110 790.00 per prod. run Mat, handlings 42,120 234 = $ 180.00 per mat mave Mach. setup S 22,450 + 175 = $ 134.00 per mach. setup Assembly S 80,000 10.000 = $ 6.00 per mach hour Inspection S 13,600 5 340 = S 40.00 per inspection Naw calculate the cost of an interior door and an exterior doar under an activity based costing system. (Round interim calculations to the nearest cent and your final answers to the nearest whale dollar.) ABC costing system Interior Exterior Direct materials cost $ 135 000 $ 104.000 Direct manufacturing labor cost 75,800 68.240 Indirect costs allocated: Production scheduling 27.650 59.250 Materials handing 12,960 29,160 Machine setup 4,690 19,760 Assembly 36.000 24.COD Inspection 8.400 5.200 Marketing 16,800 14.720 317,100 $ 321,330 Total costs Now calculate the cost per unit for each product under ABC. (Round your answers to the nearest cent.) ABC costing system Interior Exterior Total cost per unit $ 105.70 $ 200.83 Requirement 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior and exterior door? Relative to the ABC system, the simple costing system overcosts interior doors and undercosts exterior doors. Under the simple costing system, the volume of the production of interior doors is driving the amount of overhead allocated to the interior doors. The ABC study reveals that each exterior door requires more production runs, material moves, and setups . This is reflected in the higher indirect costs allocated to exterior doors in the ABC system. Requirement 4. How might Decorative Doors, Inc., use the new cost information from its activity-based costing system to address the declining market share for interior doors? (Select all choices that apply.) A. Decorative Doors should consider increasing the price of its exterior doors, depending on the competition it faces in this market. B. Decorative Doors, Inc. should consider decreasing the price of its exerior doors to be more competitive. C. Decorative Doors, Inc. should consider increasing the price of its interior doors depending on the competition it faces in this market. D. Decorative Doors can use the ABC information to improve its own operations. It could examine each of the indirect cost categories and analyze whether it would be possible to deliver the same level of service, but consume fewer indirect resources, or find a way to reduce the per-unit-cost-driver cost of some of those indirect resources. E. Decorative Doors, Inc. can use the information revealed by the ABC system to change its pricing based on the ABC costs. F. Decorative Doors, Inc. should consider decreasing the price of its interior doors to be more competitive
