Norwegian Furniture Manufacturing makes two models of office chairs: regular and deluxe.Summary data for the two products showed the following:
* Under the company's current costing, manufacturing overhead is allocated on the basis of direct labour-hours.The overhead for the year follows:
The following table presents the activity levels that relate to the overhead costs:
The market price for the regular chairs is $ 104 with expected sales of 40,000 units.The company expects to sell 25,000 deluxe chairs at a selling price of $170 per unit.Required:
Determine the unit gross profit for the regular chair using both traditional and activity-based costing methods.

Question

Norwegian Furniture Manufacturing makes two models of office chairs: regular and deluxe.Summary data for the two products showed the following:
  * Under the company's current costing, manufacturing overhead is allocated on the basis of direct labour-hours.The overhead for the year follows:
  The following table presents the activity levels that relate to the overhead costs:
  The market price for the regular chairs is $ 104 with expected sales of 40,000 units.The company expects to sell 25,000 deluxe chairs at a selling price of $170 per unit.Required:
Determine the unit gross profit for the regular chair using both traditional and activity-based costing methods.

Quizplus · Accepted Answer

The Answer of Norwegian Furniture Manufacturing makes two models of office chairs: regular and deluxe.Summary data for the two products showed the following:
  * Under the company's current costing, manufacturing overhead is allocated on the basis of direct labour-hours.The overhead for the year follows:
  The following table presents the activity levels that relate to the overhead costs:
  The market price for the regular chairs is $ 104 with expected sales of 40,000 units.The company expects to sell 25,000 deluxe chairs at a selling price of $170 per unit.Required:
Determine the unit gross profit for the regular chair using both traditional and activity-based costing methods.

Norwegian Furniture Manufacturing Makes Two Models of Office Chairs: Regular