Kristopher Manufacturing_Activity costing

$10.00

Description

1.
Kristopher Manufacturing produces two types
of entry doors: Deluxe and
Standard. The allocation basis for
support costs has been direct labor dollars.
For 2009, Kristopher compiled the following data for the two products:

Deluxe

Standard

Sales in units

50,000

400,000

Sales price per unit

$650

$475

Direct material and labor costs per unit

$180

$130

Manufacturing overhead costs per unit

$80

$120

Last year, Kristopher
purchased an expensive robotics system to allow for more decorative door
products in the deluxe product line. The
CFO suggested that an activity-based costing (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 for 2009:

Activity

Cost

Cost Driver

Total

Deluxe

Standard

Setups

$500,000

# of setups

500

400

100

Machine-related

$44,000,000

# of machine hours

600,000

300,000

300,000

Packing

$5,000,000

# of shipments

250,000

50,000

200,000

Required (15 points):

a. Using the
current system, what is the estimated

1. total cost
of manufacturing one unit for each type of door?

2. profit per
unit for each type of door?

b. Using the
activity-based costing data presented above,

1. compute
the cost-driver rate for each overhead activity.

2. compute
the revised manufacturing overhead cost per unit for each type of entry door.

3. compute
the revised total cost to manufacture one unit of each type of entry door.

4. compute
the profit per unit for each type of door.

c. Is the
deluxe door as profitable as the original data estimated? Why or why not?

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