Alejandro Kirk
Question 1.2
Alejandro Kirk Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2021, Alejandro Kirk the following data for the two products:
|
|
Deluxe |
Standard |
|
Sales units |
50,000 |
400,000 |
|
Sales price per unit |
$650.00 |
$475.00 |
|
Direct material and labour costs per unit |
$180.00 |
$130.00 |
|
Manufacturing support costs per unit |
$80.00 |
$120.00 |
Last year, Alejandro Kirk Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information:
|
Activity |
Cost Driver |
Cost |
Total |
Deluxe |
Standard |
|
Setups |
# of setups |
$500,000 |
500 |
400 |
100 |
|
Machine related |
# of machine hours |
$4,000,000 |
600,000 |
300,000 |
300,000 |
|
Packing |
# of shipments |
$5,000,000 |
250,000 |
50,000 |
200,000 |
Required
- Using the current traditional (simple) costing system, determine the estimated:
a) total
b) profit per unit for each type of door
2. Using the activity-based costing data presented above,
a) compute the cost driver rate for each overhead activity
b) compute the revised manufacturing overhead cost per unit for each type of entry door
c) compute the revised total cost to manufacture one unit of each type of entry door
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