Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Prescott, Inc., manufactures bookcases and uses an activity-based costing system. Prescott's activity areas and related data follows: Activity Budgeted Cost of Activity Allocation Base Cost

Prescott, Inc., manufactures bookcases and uses an activity-based costing system. Prescott's activity areas and related data follows:
Activity Budgeted Cost of Activity Allocation Base Cost Allocation Rate
Materials handling $230,000 Number of parts $0.50
Assembly 3,200,000 Direct labor hours 16.00
Finishing 180,000 Number of finished units 4.50
Prescott produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:
Product Total Units Produced Total Direct Materials Costs Total Direct Labor Costs Total Number of Parts Total Assembling Direct Labor Hours
Standard bookcase 3,000 $36,000 $45,000 9,000 4,500
Unfinished bookcase 3,500 35,000 35,000 7,000 3,500
Requirements:
1. Compute the manufacturing product cost per unit of each type of bookcase.
2. Suppose that pre-manufacturing activities, such as product design, were assigned to the standard bookcases at $7 each, and to the unfinished bookcases at $2 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $22 per standard bookcase and $14 per unfinished bookcase. Compute the full product costs per unit.
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 unfinished bookcases to earn $15 per bookcase?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

1. What are your creative strengths?

Answered: 1 week ago

Question

What metaphors might describe how we work together?

Answered: 1 week ago