Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $84 00 per machine hour Production information follows Deluxe Executive Direct material cost $ 10 $ 15 Direct labor cost 15 15 Budgeted volume (units) 16,800 31,500 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 104 64 168 Machine hours 33,600 47,250 80,850 Outgoing shipments 200 150 350 The firms total overhead of $6,791,400 is subdivided as follows manufacturing setups, $1,481,760 machine processing, $4,074,840 and product shipping, $1,234,800 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 $242 and the marketing manager is contemplating a $31 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 $84.00 per machine

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Posted on Aug 31, 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 $84.00 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		104		64		168
Machine hours		33,600		47,250		80,850
Outgoing shipments		200		150		350

The firms total overhead of $6,791,400 is subdivided as follows: manufacturing setups, $1,481,760; machine processing, $4,074,840; and product shipping, $1,234,800.

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 $242 and the marketing manager is contemplating a $31 discount to stimulate volume. Is this discount advisable?