Stylish 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 Stylish Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Stylish Doors 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. 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 costs in indirect cost pool Bgt. total qty of cost allocation base Simple costing system $ 23.79 per machine-hour $ 237,880 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.) Simple costing system Interior Exterior Direct materials cost $ 170,500 $ 127,500 Direct manufacturing labor cost 79,360 130,845 61,200 107,055 Indirect cost allocated 380,705 $ 295,755 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 122.81 $ 173.97 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 rates. (Round your answers to the nearest cent. Abbreviations used: Bgt. = Budgeted, mach. = machine, mat. = material, prod. = production, sch. = scheduling, qty = quantity.) = = Bgt. cost of activity + Bgt. total qty. of cost allocation base = ABC allocation rate Prod. sch. $ 105,000 + 140 = $ 750.00 per prod. run Mat. handling $ 43,680 240 $ 182.00 per mat. move Mach. setup $ 23,100 - 175 = $ 132.00 per mach. setup Assembly $ 30,000 + 10,000 = $ 3.00 per mach. hour Inspection $ 20,900 t $ 380 = Il $ 55.00 per inspection Now calculate the cost of an interior door and an exterior door under an activity-based costing system. (Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.) ABC costing system Interior Exterior Direct materials cost 170,500 $ 127,500 Direct manufacturing labor cost 79,360 61,200 Indirect costs allocated: 33,750 71,250 13,650 30,030 Production scheduling Materials handling Machine setup Assembly Inspection 5,280 17,820 16,500 13,500 8,250 12,650 8,060 Marketing 7,140 $ 339,750 $ 336,690 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 $ 109.60 $ 198.05 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 interior doors and exterior doors. Under the simple costing system, the is driving the amount of overhead This is reflected in the allocated to exterior doors in the ABC allocated to the interior doors. The ABC study reveals that each exterior door requires system. Total costs $ 339,750 $ 336,690 Now calculate the cost per unit for each product under / vers to the nearest cent.) Intel erior ABC costing system Total cost per unit overcosts 198.05 undercosts Requirement 3. Compare the costs of the doors in requ do the simple and activity-based costing systems differ in the cost of a Relative to the ABC system, the simple costing system interior doors and allocated to the interior doors. The ABC study reveals that each exterior door requires system. exterior doors. Under the simple costing system, V This is ref Total COSIS Now calculate the cost per unit for each product under ABC. (Round your answers to the ABC costing system Interior Exterior 198. overcosts $ 109.60 $ Total cost per unit undercosts d costing systems differ in the cost of an interior an Requirement 3. Compare the costs of the doors in requirements 1 and 2. Why do the si hy exterior doors. Under the simple costing system, the This is reflected in the Relative to the ABC system, the simple costing system interior doors and allocated to the interior doors. The ABC study reveals that each exterior door requires system. 8,250 7,140 336,690 units of sales of exterior doors answers to the nearest cent.) Exterior volume of the production of interior doors 198.05 volume of the production runs Why do the simple and activity-based costing systems differ in the cost of an inte erior doors and exterior doors. Under the simple costing system, the V. This is reflected in the is driving the amount of overhea allocated to exterior doors in the ABC door requires 12,650 8,060 8,250 7. 339,750 $ 336,6 less production runs, material moves, and setups per unit for each product under ABC. (Round your answers to th more direct labor Interior Exterior 109.60 $ 198 more direct materials an interior and exterior do are the costs of the doors in requirements 1 and 2. Why do the : more production runs, material moves, and setups 1, the stem, the simple costing system V interior doors and r doors. The ABC study reveals that each exterior door requires This is reflected in the mm 13,500 8,250 7,140 336,690 higher direct materials costs -ur answers to the nearest cent.) higher indirect costs Exterior 198.05 lower direct labor costs 2. Why do the simple and activity-based costing systems differ in the cost of an interior and lower indirect costs nterior doors and exterior doors. Under the simple costing system, the V. This is reflected in the ving the amount of overhead allocated to exterior doors in the ABC or door requires - More info - Data table Interior Exterior 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 Stylish Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Stylish Doors collected the following data related to the indirect cost activities: Units sold 3,100 1,700 $ 130 $ 210 $ 55 $ 75 $ 16 $ 16 1.60 2.25 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 45 Activity Activity Cost Activity Cost Driver Production scheduling $ 105,000 Production runs Material handling $ 43,680 Material moves Machine setup 23,100 Machine setups Assembly $ 30,000 Machine-hours Inspection 20,900 Number of inspections Marketing costs were determined to be 2% of the sales revenue for each type of door. 95 75 165 40 135 5,500 4,500 230 150 Print Done Print Done 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 Stylish Doors, Inc., use the new cost information from its activity-based costing system to address the declining market share for interior doors? Print Done