Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $112 00 per machine hour Production information follows Deluxe Executive Direct material cost $ 24 $ 36 Direct labor cost 29 29 Budgeted volume (units) 22,400 42,000 The controller, who is studying the use of activity based costing, has determined that the firms overhead can be identified with three activities manufacturing setups, machine processing, and product shipping Data on the number of setups, machine hours, and outgoing shipments, which are the activities three respective cost drivers, follow Deluxe Executive Total Setups 132 92 224 Machine hours 44,800 63,000 107,800 Outgoing shipments 200 150 350 The firms total overhead of $12,073,600 is subdivided as follows manufacturing setups, $2,634,240 machine processing, $7,244,160 and product shipping, $2,195,200 Required 1 Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using the companys current overhead costing procedures 2 Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using activity based costing (Round activity based application rates, overhead application and the final answers to 2 decimal places ) 3 Is the cost of the Deluxe filing cabinet overstated or understated (i e , distorted) by the use of machine hours to allocate total manufacturing overhead to production By how much (Round your answer to 2 decimal places ) 4 Calculate the aggregate amount by which the Deluxe cabinet line is undercosted by the companys current traditional overhead costing procedures Calculate the aggregate amount by which the traditional system overcosts the Executive cabinet line (Round your answers to the nearest whole dollar ) 5 Assume that the current selling price of a Deluxe filing cabinet is $332 and the marketing manager is contemplating a $38 discount to stimulate volume Is this discount advisable Yes No

Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $112.00 per machine

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Posted on Sep 14, 2024

Direct-material cost

Direct-labor cost

Budgeted volume (units)

Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $112.00 per machine hour. Production information follows.

The controller, who is studying the use of activity-based costing, has determined that the firms overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities three respective cost drivers, follow.

	Deluxe		Executive		Total
Setups		132		92		224
Machine hours		44,800		63,000		107,800
Outgoing shipments		200		150		350

The firms total overhead of $12,073,600 is subdivided as follows: manufacturing setups, $2,634,240; machine processing, $7,244,160; and product shipping, $2,195,200.

Required:

1.	Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using the companys current overhead costing procedures.

2.	Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using activity-based costing. (Round activity based application rates, overhead application and the final answers to 2 decimal places.)

3.	Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much? (Round your answer to 2 decimal places.)

4.	Calculate the aggregate amount by which the Deluxe cabinet line is undercosted by the companys current traditional overhead costing procedures. Calculate the aggregate amount by which the traditional system overcosts the Executive cabinet line. (Round your answers to the nearest whole dollar.)

Assume that the current selling price of a Deluxe filing cabinet is $332 and the marketing manager is contemplating a $38 discount to stimulate volume. Is this discount advisable?