Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:

Required:
a. Using the current traditional (simple) costing system, determine 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 current traditional cost system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. 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
e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Question

Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:
  
Required:
a. Using the current traditional (simple) costing system, determine 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 current traditional cost system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. 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
e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Quizplus · Accepted Answer

The Answer of Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:
  
Required:
a. Using the current traditional (simple) costing system, determine 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 current traditional cost system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. 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
e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Come-On-In Manufacturing Produces Two Types of Entry Doors: Deluxe and Standard