FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Green Furniture (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets. The
production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour
costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the
allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by
applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter.
Activity Cost Pool
Parts receipts
Machining
Assembly
Quality control
Direct materials
Direct labour
Total manufacturing cost
Cost per unit
Activity Base
Number of parts
Machine-hours
Units produced
Units tested
Total manufacturing cost
Cost per unit
$
$
Desks
26,735 $
23.25 $
Cabinets
Desks
28,275
17.67
Activity Rate
$1.00 per part
$11.00 per machine-hour
Each product consumed 690 direct labour-hours.
Required:
1. Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based
costing to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.)
$ 1.80 per unit
$ 2.00 per unit
Cabinets
Desks
2,300 parts
235 machine-hours.
1,150 units
115 units
Activity Usage
$ 5,750
$13,800
2. Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.)
Cabinets
1,600 parts
345 machine-hours
1,600 units
1,500 units
$3,200
$13,800
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Transcribed Image Text:Green Furniture (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets. The production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter. Activity Cost Pool Parts receipts Machining Assembly Quality control Direct materials Direct labour Total manufacturing cost Cost per unit Activity Base Number of parts Machine-hours Units produced Units tested Total manufacturing cost Cost per unit $ $ Desks 26,735 $ 23.25 $ Cabinets Desks 28,275 17.67 Activity Rate $1.00 per part $11.00 per machine-hour Each product consumed 690 direct labour-hours. Required: 1. Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based costing to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.) $ 1.80 per unit $ 2.00 per unit Cabinets Desks 2,300 parts 235 machine-hours. 1,150 units 115 units Activity Usage $ 5,750 $13,800 2. Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.) Cabinets 1,600 parts 345 machine-hours 1,600 units 1,500 units $3,200 $13,800
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