Answered step by step
Verified Expert Solution
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started