Concept explainers
Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar’s activity areas and related data follow:
*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory
Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:
Requirements
- 1. Compute the manufacturing product cost per unit of each type of bookcase.
- 2. Suppose that pre-manufacturing activities, such as product design, were assigned to the standard bookcases at $5 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-
manufacturing costs were $20 per standard bookcase and $18 per unfinished bookcase. Compute the full product costs per unit. - 3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
- 4. What price should Oscar’s managers set for unfinished bookcases to earn a net profit of $19 per bookcase?
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