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Please show calculation Decorative Doors, Inc., produces two types of doors, interior and exterior. The company's simple costing system has two direct-cost categories (materials and
Please show calculation 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: nterior Exterior 3,200 1 Units sold 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 S 125 $ 200 S 30 S 45 S 16 S 16 1.50 2.25 85 168 155 500 4,500 150 72 45 250 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 Production runs Material moveS Activity Production scheduling Material handling Machine setup Assembly Inspection S95,000 S45,000 Machine setups S25,000 S60,000 S 8,000 Machine-hours Number of inspections Marketing costs were determined to be 3% of the sales revenue for each type ofdoor. Required 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 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 door and an exterior door? 3
Please show calculation
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