Prescott Corp. manufactures computer desks in its Seville, Ohio, plant. The company uses activity-based costing to allocate all manufacturing conversion costs (direct labor and manufacturing overhead). Its activities and related data follow:

Activity Budgeted Cost of Activity Allocation Base Cost Allocation Rate

Materials handling............ $330,000 Number of parts $ 0.70

Assembling........................ $2,600,000 Direct labor hours $16.00

Painting ............................ $ 150,000 Number of painted desks $ 5.10

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

Product Total Units Produced Total Direct Materials Costs

Standard desk 5,500 $99,000

Unpainted desk 3,000 $18,000

Product Total # of parts Total Assembly Direct Labor Hours

Standard desk 118,500 5,700

Unpainted desk 28,500 1,000

QUESTIONS:

1.Compute the per-unit manufacturing product cost of Standard desks and Unpainted desks.

2.Premanufacturing activities, such as product design, were assigned to the Standard desks at $4 each and to the Unpainted desks at $3 each. Similar analyses were conducted of post-manufacturing activities, such as distribution, marketing, and customer service.The post-manufacturing costs were $23 per Standard and $22 per Unpainted desk. Compute the full product costs per desk.

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

4.What price should Prescott's managers set for Standard desks to earn a $41 profit per desk?