Activity-Based Costing and Conventional Costs Compared
Hickory Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoal Smoker. The Cooker is a premium product sold in upscale outdoor shops; the Smoker is sold in major discount stores. Following is information pertaining to the manufacturing costs for the current month.
Gas Cooker Charcoal Smoker
Units 2,000 8,000
Number of batches 50 20
Number of batch moves 90 50
Direct materials $ 70,000 $ 130,000
Direct labor $ 44,000 $ 56,000
Manufacturing overhead follows:
Activity Cost Cost Driver
Materials acquisition and inspection $ 68,000 Amount of direct materials cost
Materials movement 19,600 Numbers of batch moves
Scheduling 43,400 Number of batches
$ 131,000
Rounding instructions: Do not round until your final answers. Round total cost answers to the nearest dollar and per unit answers to the nearest cent.
(a) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming all manufacturing overhead is assigned on the basis of direct labor dollars.
Total cost $Answer
Gas Cooker $Answer per unit
Charcoal Smoker $Answer per unit
(b) Determine the total and per-unit costs of manufacturing the Gas Cooker and Charcoal Smoker for the month, assuming manufacturing overhead is assigned using activity-based costing.
Total cost $Answer
Gas Cooker $Answer per unit
Charcoal Smoker $Answer per unit